Bankrupt cryptocurrency exchange FTX has confirmed a “massive shortfall” in its digital asset and fiat currency holdings, with billions worth of customer funds missing from both the exchange and its United States-based arm, FTX US.
In a public presentation released on Thursday, FTX stated that it had identified around $2.7 billion of customer assets, compared with $11.6 billion of balances outstanding on customer accounts.
The estimated value of FTX’s assets and liabilities are based on crypto prices on the day of the company’s bankruptcy filing in early November, according to the Wall Street Journal.
However, in a recent update, FTX revealed that $8.9 billion worth of customer funds have been unaccounted for and therefore missing.
This is the first time the exchange has provided a number pertaining to the fund deficiency. Alameda Research, FTX’s sister trading firm, had borrowed around $9.3 billion from customer accounts before bankruptcy.
Thus, the current $8.9 billion hole can be attributed to Alameda Research. FTX did not clarify if the funds were borrowed with or without customer consent.
Will FTX Compensate?
It remains unclear how much compensation affected customers will receive, even though the exchange has tracked down $2.7 billion. However, around $1.5 billion of that said amount includes illiquid crypto assets like FTX’s token, FTT.
Former FTX CEO Sam Bankman Fried has pleaded not guilty to charges in the US court. If all the charges against him are proven, he may face jail time of up to 115 years.
Nishad Singh, FTX’s former engineering director, pleaded guilty to charges of fraud earlier this week. Singh’s plea follows a number of Bankman-Fried’s close associates reportedly agreeing to cooperate with U.S. prosecutors in recent months.
FTX’s CEO, John J. Ray III, and Chief Restructuring Officer, said,
“FTX’s books and records are incomplete and, in many cases, totally absent. For these reasons, it is important to emphasize that this information is still preliminary and subject to change.”
FTX wallets showed a $9.3 billion net borrowing by Alameda Research and a $107 million net payable to Alameda from FTX US.
The company recorded surpluses across its less liquid “Category B Assets,” which includes its own FTT Token, but the holdings are insignificant compared to the deficits on its other held assets.
In total, FTX recorded an $8.6 billion deficit across all wallets and accounts, while FTX US recorded a deficit of $116 million.
