FTX’s former CEO, Sam Bankman-Fried, has reiterated claims that FTX US is solvent following FTX debtors’ latest statements to the contrary. According to Bankman-Fried, the group failed to account for customers’ bank balances, which bring the US entity’s assets well above its liabilities to customers. Clearing the Air on FTX US In a substack post on Wednesday, Bankman-Fried said that certain statements on Tuesday from Sullivan and Cromwell (S&C; one of the law firms managing FTX’s bankruptcy) were “extremely misleading” as they pertain to FTX US’s solvency. At the time, the law firm stated that the assets it had managed to identify belonging to the exchange were “substantially less than the aggregate third-party customer balances suggested by the electronic ledger for
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FTX’s former CEO, Sam Bankman-Fried, has reiterated claims that FTX US is solvent following FTX debtors’ latest statements to the contrary.
According to Bankman-Fried, the group failed to account for customers’ bank balances, which bring the US entity’s assets well above its liabilities to customers.
Clearing the Air on FTX US
In a substack post on Wednesday, Bankman-Fried said that certain statements on Tuesday from Sullivan and Cromwell (S&C; one of the law firms managing FTX’s bankruptcy) were “extremely misleading” as they pertain to FTX US’s solvency.
At the time, the law firm stated that the assets it had managed to identify belonging to the exchange were “substantially less than the aggregate third-party customer balances suggested by the electronic ledger for FTX US.” In a separate presentation, the firm also claimed there were significant asset shortfalls at both FTX International and FTX US.
“These claims by S&C are wrong, and contradicted by data later on in the same document,” said Bankman-Fried. “FTX US was and is solvent, likely with hundreds of millions of dollars in excess of customer balances.”
Bankman-Fried told the same story about the US exchange both before and after the FTX Group filed it for bankruptcy in November, as both exchanges’ assets were separated. Similarly, John J. Ray III – FTX’s new boss overseeing the bankruptcy – told Congress last month that FTX US assets were separate from Alameda Research’s, with which FTX International had comingled its funds.
In fact, Bankman-Fried asserted that FTX US has a positive balance sheet within the realm of $400 million in excess cash. He arrives at this figure by including the $428 million within FTX US’s bank accounts as an asset – which he said Cromwell has failed to do.
The Numbers
Specifically, the law firm presented customer balances as worth $497 million, exceeding the $181 million in digital assets FTX US had identified associated with the exchange. Thus, Cromwell concluded that FTX had a major asset shortfall. When including the exchange’s bank account balance, however, this shortfall becomes a surplus.
Furthermore, Bankman-Fried contested that the $497 million customer balance figure was outdated, taken before FTX US had experienced massive withdrawals. In reality, he believed the figure to be about $199 million.
Comparing $609 million in total cash and digital assets to a $199 million customer balance figure, Bankman-Fried concluded that FTX US had “at least $111m, and likely around $400m” in excess cash before bankruptcy.
“FTX US is solvent,” he said. “Customers should be given access to their funds.”
Of the $181 million in digital assets identified as being associated with FTX US, $90 million has gone missing, according to the exchange’s debtors on Tuesday.
Bankman-Fried has pleaded not guilty to charges of wire fraud, money laundering conspiracy, and other accusations suggesting he had cheated investors. By contrast, Alameda Research’s former CEO Caroline Ellison, as well as Bankman-Fried former right hand Gary Wang, have pleaded guilty to similar charges.