FTX will sell or restructure global empire, CEO says

FTX’s new CEO said on Saturday that the bankrupt crypto exchange is looking to sell or restructure its global empire, even as Bahamian regulators and FTX squabble in court filings and press releases over whether the bankruptcy filing should take place in New York or in Delaware.

“Based on our review over the past week, we are pleased to learn that many of FTX’s regulated or licensed subsidiaries, inside and outside the United States, have solvent balance sheets, responsible management and valuable franchises,” FTX chairman John Ray, said in a statement.

Ray, who replaced FTX’s founder Sam Bankman-Fried when the company filed for Chapter 11 bankruptcy protection on November 11, added that it is a “priority” in the coming weeks to “explore sales, recapitalizations or other strategic transactions with respect to this subsidiary.” , and others we identify as our work continues.”

Ray’s statement came with a filing Saturday morning in Delaware bankruptcy court. In their filings, FTX asked for permission to pay external vendors, consolidate bank accounts, and establish new ones.

The exact timing of the possible sale is unclear. FTX indicated that it has not set a specific timetable for the completion of this process and said that it “does not intend to disclose further developments unless and until it determines that further disclosure is appropriate or necessary.”

Both FTX and the Bahamas securities regulator sought jurisdiction over the bankruptcy proceedings in two different US courts. Last week, Bahamian regulators transferred potentially hundreds of millions of “digital assets” from the custody of FTX to their own, acknowledging the deed in a press release after FTX attorneys accused them of doing so in an emergency court filing.

Ray singled out some of the healthier subsidiaries for praise. One example is LedgerX, a derivatives platform regulated by the Commodity Futures Trading Commission. LedgerX is one of the few FTX-related properties that is not part of the bankruptcy process and remains operational today. Platform, that is FTX acquired in 2021Let traders buy options, swaps and futures on bitcoin and ethereum.

The new FTX CEO is asking employees, traders, customers, regulators and government stakeholders to “be patient” with them.

FTX said in the filing that there is may be more than one million creditors in this Chapter 11 case.

FTX and its accountants have identified 216 bank accounts, across 36 banks, with positive balances globally. Cash balances across all entities totaled $564 million, with $265.6 million of that in custody of LedgerX on a restricted basis.

FTX’s lawyers also want to use a “cash pooling system,” combining all the cash assets of each of the different FTX entities into one consolidated balance sheet and in a new bank account, which FTX is currently in the process of opening.

In particular, FTX lawyers wrote that they “worked, and will continue to work, closely with [existing FTX banks] to ensure that prior authorization signatories do not have access “to any prior FTX accounts that will continue to be used. Prior reporting and court filings have indicated that Sam Bankman-Fried held almost absolute control over cash management and account access.

The FTX bank account reflects the global influence of the crypto-asset empire. Institutions in Cyprus, Dubai, Japan and Germany hold various global currencies. FTX’s subsidiary holds more than a dozen accounts at Signature Bank, an American institution that is making aggressive efforts to serve crypto customers in 2021. Except for one Bank of America account for Blockfolio, major American banks are not included in the list. Blockfolio was acquired by FTX in the summer of 2020.

In another petition, FTX lawyers moved to access $9.3 million for vendor payments that FTX called “critical”. No list was provided, but the FTX motion established criteria for “critical vendor” status.

In welcome news for customers, FTX attorneys applied to the court for permission to redact “certain confidential information,” including names and “all associated identifying information” of FTX’s customers. “Public dissemination of [FTX’s] customer list can give […] “Competitors gain an unfair advantage to contact and capture their customers,” the filing read, potentially jeopardizing FTX’s ability to sell its assets or business.

FTX’s lawyers want the proceedings to continue in Delaware. Bahamian regulators, on the other hand, have admitted that they do not recognize the authority of the Chapter 11 proceedings and want to hold the Chapter 15 proceedings in New York.

Chapter 15 bankruptcy is the path that the defunct hedge fund Three Arrows Capital has pursued. The implosion of Three Arrows opened a spiraling crisis that has taken down Voyager, Celsius, and finally FTX.

The Chapter 11 process that FTX is seeking would allow it to reorganize or sell the company to the highest bidder, though it’s unclear who that would be. Rival exchange Binance initially made the offer before pulling it. That turnaround caused a liquidity crisis at FTX and exposed a multibillion-dollar hole.

FTX’s first hearing in its bankruptcy court case is set for Tuesday in Delaware.

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