FTX, the cryptocurrency exchange that faced a tumultuous collapse in 2022, has been steadily unloading its crypto assets and accumulating cash reserves, according to a recent report by Bloomberg. This financial maneuver has caught the attention of industry experts and observers as FTX’s cash reserves nearly doubled by the end of 2023, surging from approximately $2.3 billion at the end of October to an impressive $4.4 billion.
Bankruptcy advisers seek solutions
FTX’s decision to amass a significant cash stockpile coincides with ongoing efforts to repay customers whose accounts were frozen during the platform’s collapse in 2022. The company has been navigating a complex bankruptcy process, with bankruptcy advisers diligently working to track down assets and establish pathways for customer restitution.
According to Chapter 11 monthly operating reports, FTX’s four largest affiliates, including FTX Trading Ltd. and Alameda Research LLC, have played a pivotal role in boosting the group’s cash pile. This collaborative effort led to the cash reserves reaching the $4.4 billion mark by the close of 2023. It’s worth noting that the company’s total cash holdings may be even higher when considering its other affiliates.
FTX has not remained passive during this period of financial restructuring. In a recent court filing, the company disclosed that it had raised $1.8 billion by selling a portion of its digital assets through December 8. Additionally, FTX has engaged in Bitcoin derivative trades as a means to hedge its exposure to the volatile cryptocurrency market while generating additional yield from its digital holdings. The exchange is also exploring potential options to restart its operations.
Challenges in customer claims
As the accumulation of cash reserves progresses, the value of customer accounts has also been on an upward trajectory. Since the unraveling of FTX in November 2022, bankruptcy advisers have been actively identifying and recovering assets to benefit customers with smaller accounts on the platform. This includes the pursuit of major lawsuits against former associates of Sam Bankman-Fried, the founder of FTX, and other cryptocurrency firms like Bybit Fintech Ltd. that withdrew funds from FTX prior to its Chapter 11 filing.
It is essential to know that FTX’s financial landscape has led to significant changes in the trading prices of customer claims. As of the latest data, claims worth more than $1 million were trading at around 73 cents on the dollar, a notable increase from approximately 38 cents on the dollar in October. However, it is crucial to note that various factors, including each claim’s specific value, influence actual trading prices.
FTX has acknowledged transparently that it does not anticipate fully repaying its customers. Furthermore, the company has proposed a model that pegs the value of customers’ digital assets at the time of the bankruptcy filing. This approach has been met with opposition from dozens of FTX customers who argue that it would cause them to miss out on the significant gains seen in the cryptocurrency market, particularly the yearlong Bitcoin rally and the resurgence of other tokens.
