What does this mean for FTX account holders and counterparties?
Just six weeks ago, FTX commanded a $32 billion valuation. On November 11th, the global crypto currency exchange filed a voluntary petition for chapter 11 bankruptcy in the District of Delaware (Case No. 22-11068). Prominent equity investors wrote the company down to zero after it experienced $6 billion in customer withdrawals over 72 hours and rival crypto exchange Binance turned down a last ditch offer to sell – which, of course, played out over Twitter. Concurrent with the chapter 11 filing, FTX’s CEO and founder, Sam Bankman Fried (SBF) stepped down, appointing Enron turnaround veteran John Ray III as CEO.
Questions are mounting about the flows of customer funds from FTX to SBF’s hedge fund Alameda Research and other affiliates. Despite SBF’s recent assurances that the US-based arm was liquid, West Realm Shires Services Inc. (doing business as FTX.US) also filed for chapter 11 (Case No. 22-1107168)
With SBF unable to find anyone willing to lend the reported $9.4 billion needed to keep the company afloat, it’s now up to the bankruptcy lawyers, investment bankers, financial analysts and forensic accounts to sort through the morass of prepetition transactions and intercompany relationships to sort out an alleged $8 billion hole.
For FTX customers with funds tied up and in need of liquidity, Xclaim can help.
Xclaim has been providing information and resources to creditors of Celsius and Voyager for the past few months as they navigate their own bankruptcy situations. Xclaim operates the largest and only independent bankruptcy claims market. Every day, we are connecting creditors unable or unwilling to wait for the courts to resolve a complicated restructuring process with sources of liquidity. For FTX customers with funds tied up and in need of liquidity, Xclaim can help.
FTX and its affiliates (now referred to as debtors) have filed what is referred to by bankruptcy professionals as a “Free Fall” bankruptcy. As of right now, it’s not clear whether FTX has retained proper restructuring counsel or other professional advisors, and FTX has done zero pre-filing work to start formulating a restructuring plan, coordinate with creditors or determine how to position the case. More to come on that in the next few days to be sure as a Judge is appointed to manage the case. The average bankruptcy case takes 2.8 years from start to finish, but these types of restructurings tend to take even longer, and burn up higher fees given the lack of prepetition planning and organization
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