Inside FTX’s horror accounts
FTX’s chaotic and amateurish final days before collapse have been revealed by the crypto platform’s chief executive | FULL ANALYSIS
A look at the balance sheet of collapsed crypto giant FTX shows that Australian investors – of which there are nearly 30,000 – will face an uphill battle to recover their money.
The leaked spreadsheet, prepared by chief executive Sam Bankman-Fried one day before the company filed for bankruptcy, shows FTX figured that it had nearly $US9bn ($13.4bn) in liabilities before its collapse, along with $US900m in liquid assets, $US5.5bn of “less liquid” assets and $US3.2bn in “illiquid” assets.
“There were many things I wish I could do differently than I did, but the largest are represented by these two things: the poorly labelled internal bank-related account, and the size of customer withdrawals during a run on the bank,” Bankman-Fried wrote in a note accompanying the spreadsheet.
John J Ray, the insolvency lawyer who is FTX’s new chief executive, said the company “has valuable assets” and that the company will now “assess the situation and … maximise recoveries for stakeholders”.
Australian securities regulator ASIC on Wednesday suspended FTX’s financial licence until mid-May next year, although it can provide limited financial services that relate to the termination of existing derivative contracts.
“ASIC is monitoring this situation closely and speaking regularly with international regulators and the external administrators,” it said.
Danny Talwar, head of tax for crypto group Koinly, said whether the 30,000 FTX users in Australia can claim a capital loss for tax purposes was not fully clear.
“Whilst it appears unlikely that users with frozen funds will get their assets back, the Chapter 11 process could drag this process out over a long period of time,” he said.
“In the meantime, it is probably too early to determine whether an FTX user in Australia is eligible for a full capital loss claim.
“An added complexity relates to claims of the FTX platform being hacked, with many users reporting 0 balances prior to their FTX accounts being inaccessible.
“Evidencing users’ claims on losses will present an ongoing challenge if FTX remains offline.”
Liquid assets
Mr Bankman-Fried bought a 7.6 per cent stake in stock trading platform Robinhood (HOOD) in May, then reportedly attempting to offload the stock at a 20 per cent discount last week at $US9 per share.
FTX had around $US470m in Robinhood stock, which was a large chunk of the company’s liquid holdings.
HOOD plunged by 30 per cent in two days on investor concerns around its exposure to FTX’s liquidity crunch, but Robinhood chief executive Vlad Tenev said on Twitter this week that his company has no direct exposure to the bankruptcy filing by FTX.
“Despite SBF having an equity stake in Robinhood, we have no direct exposure to Alameda, FTX, or any of its entities, and we’ve confirmed with our partners that they don’t have material exposure either,” he wrote. “In this “flight to safety”, we’re proud that customers are turning to Robinhood.”
Less liquid assets
The spreadsheet shows the company held $US5.5bn in “less liquid” assets - mostly crypto tokens including $US553m worth of its own cryptocurrency token FTT, and $US2.2bn worth of the another FTX crypto token, SRM, or Serum.
FTT and SRM have gained a label within the crypto community as being “Sam coins”, given their close affiliation to Bankman-Fried. Serum is down 71 per cent in the last week.
The exchange also held $US982m in Solarium, or SOL, which is down 58 per cent in the last seven days, and down by around 90 per cent in the past 12 months, as well as $US616m worth of the MAPS token.
The coming regulatory and legal scrutiny facing FTX will no doubt zero in on the company’s outsized “Sam coin” holdings. The crypto industry has long been criticised for its altcoins, which arguably have little real world value or purpose, and are considered by many to be bad investments.
Illiquid
Among the more eye-catching line items on FTX’s spreadsheet is a $US7m ERC-20 token called TRUMPLOSE, which is a token that was redeemable on FTX’s trading platform based on the results of the last presidential election.
FTX had also listed TRUMPWIN which was redeemable had Donald Trump won the election.
“The market price of TRUMPWIN should be roughly equal to the probability that TRUMP wins the election. And TRUMPLOSE’s market price should be roughly equal to 1 minus that probability,” FTX said on its website.
The company also held $US43.2m in Twitter stock - which itself is having the most turbulent couple of weeks in its existence - and $US500m in Anthropic, a San Francisco-based artificial intelligence lab.
Liabilities
The balance sheet shows $US9bn in liabilities, against just $US900m in liquid assets, underscoring FTX’s financial strife.
The spreadsheet shows billions in liabilities across USD, Bitcoin, USDT - also known as stablecoin Tether - as well as other cryptocurrency exchanges with exposure to FTX including BlockFi and Genesis.
The spreadsheet shows FTX owed around $US215m to BlockFi, which acknowledged in an email to customers,“significant exposure to FTX and associated corporate entities that encompasses obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line.”
“There are a number of scenarios that may be available to us, and we are doing the work now to determine the best path forward,” the email reads. “BlockFi has the necessary liquidity to explore all options and we have engaged expert outside advisors that are helping us navigate BlockFi’s next steps.”
Withdrawals
FTX was hit by the crypto equivalent of a bank run when it suffered $US5bn in withdrawals in just one day.
“When it rains, it pours,” Bankman-Fried wrote on Twitter shortly after the carnage. “We saw roughly $5bn of withdrawals on Sunday--the largest by a huge margin. And so we are where we are. Which sucks, and that’s on me. I’m sorry.”
Described by observers as a black swan-style event, the FTX withdrawals caused digital assets to tumble in value across the board.
Rival exchange Crypto.com has narrowly managed to avoid a similar run on its assets in recent days with Crypto.com CEO Kris Marszalek declaring business as usual for his platform.
Commentary
The balance sheet further shows a negative $US8bn entry, which Bankman-Fried describes as “hidden, poorly internally labeled ‘fiat@’ account”.
The 30-year-old told the Financial Times that the entry was related to funds that were “accidentally” sent to Alameda Research, FTX’s quantitative trading branch, a move that has now piqued the interest of regulators and Bahamas law enforcement.
“There were many things I wish I could do differently than I did, but the largest are represented by these two things: the poorly labeled internal bank-related (account), and the size of customer withdrawals during a run on the bank,” Bankman-Fried wrote.