Sam Bankman-Fried’s businesses owe their top creditors more than $3 billion, according to court filings as the cryptocurrency group’s huge bankruptcy proceedings unfold.
Crypto exchange FTX, founded by Bankman-Fried, and related companies on Sunday filed a list of their top 50 creditors, all of whom are customers and owe more than $20 million, two of which owe more than $200 million. The companies’ total liabilities are estimated at more than $10 billion, according to earlier filings, and there may be more than 1 million creditors.
Release of the list as part of Delaware’s Chapter 11 bankruptcy proceedings had been delayed as bankruptcy trustees struggled to find reliable records at FTX Group, which collapsed earlier this month following a liquidity crisis and allegations that it mishandled customer funds.
John Ray III, the bankruptcy expert who assumed control of the business and oversaw Enron’s liquidation, said in previous filings he had never seen “so complete a failure of corporate controls and such a complete lack of trustworthy financial information.”
FTX said it may need to update the creditor list as an “investigation.”[s] proceed with respect to the amounts listed, including payments that may have been made but not yet reflected on the [company’s] Books and Records”.
The filings show that FTX owes 10 clients more than $100 million. The top 50 creditors whose names are blacked out in the filing are all owed more than $20 million. FTX said in previous court filings that disclosing the names of its large account holders would be anti-competitive.
FTX’s clients included large financial groups that traded cryptocurrencies, such as hedge funds. Unlike traditional exchanges, cryptocurrency trading venues usually also handle client funds custody. Customers who were unable to withdraw their funds before the company halted withdrawals now have to wait a long time to get their funds back.
In other recent cryptocurrency bankruptcies involving Voyager Digital and Celsius Networks, a key legal issue has been determining whether account holders are unsecured creditors or have higher priority status in determining who receives recovery payments first. Another question that is likely to arise is whether account holders who withdrew their funds shortly before filing for bankruptcy would be subject to clawbacks.
The collapse of the exchange, which until this month was widely regarded as one of the most reliable trading venues for digital assets, has fueled fears that other companies could be at risk from their exposure to FTX and a crisis of confidence in the market.
Shares of Silvergate, a US bank known for its crypto exposure, fell around 30 percent last week. The bank said it has “the liquidity and capital ratios to support volatility.”
Hedge fund Galois Capital told clients earlier this month that “roughly half of our capital is tied to FTX.” Based on Galois’ assets under management as of June, that could total around $100 million.
In another filing on Saturday, FTX said the company has 330 employees around the world but is experiencing “extraordinary turnover.” It asked the court for permission to continue paying the remaining employees, who it said were vital to the bankruptcy event.
FTX said in court filings that new CEO Ray billed his time at $1,300 an hour and was paid a $200,000 advance fee. It also hired three new executives to help with the bankruptcy, including a chief financial officer.
A first court hearing is scheduled for Tuesday morning in the Delaware Federal Bankruptcy Court before Judge John Dorsey.