Collapsed crypto exchange FTX will seek to sell or reorganize its operations, its new chief executive said Saturday as the company prepared to appear before a US bankruptcy court.
“Based on our review over the past week, we are pleased to learn that many of FTX’s regulated or licensed subsidiaries within and outside the United States have strong balance sheets, responsible management and valuable franchises,” said John Ray III.
Ray replaced FTX founder Sam Bankman-Fried as chief executive when dozens of the group’s subsidiaries filed for bankruptcy protection on Nov. 11 after the company was unable to meet billions of dollars in customer withdrawal requests.
FTX later said it believes it has more than a million creditors. It is scheduled to appear at a first hearing in the Delaware bankruptcy court on Tuesday.
“[I]Over the coming weeks, our priority will be to consider sales, recapitalizations or other strategic transactions related to these subsidiaries,” said Ray.
FTX asked the court to allow it to keep the names and identities of its creditors confidential, arguing that FTX had no traditional creditors and that disclosing its customers would be anti-competitive to the company.
“Disseminating the debtor’s customer list publicly could give the debtor’s competitors an unfair advantage to contact and poach those customers,” FTX said.
FTX sought bankruptcy court permission to pay outside vendors it said were essential to keep its operations running while it attempted to reorganize. These include software providers as well as companies that provide security and custody of crypto assets. FTX has initially asked the court to approve $9 million in seller payments.
In a separate filing, FTX asked the court to approve a new cash management system. It said it had confirmed $565 million in cash holdings, but because it could only verify the balances in 144 of its 216 known bank accounts, “the total amount of cash was not yet known [it] stop[s]“.
FTX announced that the firm has hired Perella Weinberg Partners as its investment banker to work with attorneys from Sullivan & Cromwell and advisors from Alvarez & Marsal.
Ray cited two of FTX’s US subsidiaries, Embed Clearing and LedgerX, as well as units in Japan, Turkey and the United Arab Emirates as attractive assets. FTX’s US arm bought Embed Clearing, a brokerage technology and infrastructure provider, in June. Last October, the company acquired LedgerX, a US derivatives platform.
In a Thursday court filing, Ray detailed the chaos at Bahamas-based FTX, describing a “complete failure of corporate controls and . . . a complete lack of trustworthy financial information”.
Two other prominent cryptocurrency companies have filed for bankruptcy this year, Voyager Digital and Celsius Holdings. Like FTX, both attempted to reorganize or sell rather than seek immediate liquidation. Voyager had signed a deal to sell itself to FTX, but given FTX’s current woes, that’s unlikely to happen.
Ray has promised to investigate allegations of misconduct against Bankman-Fried and other executives.
Bankruptcy Judge John Dorsey is asked Tuesday to intervene in a looming dispute between Ray and the Bahamas.
The island nation has attempted to preserve jurisdiction over FTX Digital, an FTX subsidiary that is not among the companies that have filed for bankruptcy in Delaware. FTX Digital is facing liquidation proceedings in the Bahamas.
FTX wrote in a court filing earlier this week that there is “credible evidence that the Bahamian government is responsible for directing unauthorized access to debtors’ systems in order to obtain debtors’ digital assets — which occurred after these began.” [bankruptcy] Cases”.
In a statement released Thursday, the Securities Commission of the Bahamas said that on November 12 it “took action to direct the transfer of all digital assets from FTX Digital Markets Ltd to a commission-controlled digital wallet for safekeeping.”