Former FTX CEO Sam Bankman-Fried has reiterated claims that FTX US is solvent following recent statements by FTX debtors to the contrary.
According to Bankman-Fried, the group failed to account for customer bank balances, raising the US bank’s assets well above its customer liabilities.
Cleaning the Air at FTX US
in a subpile post On Wednesday, Bankman-Fried said certain statements Tuesday by Sullivan and Cromwell (S&C; one of the law firms handling FTX’s bankruptcy) were “grossly misleading” about the solvency of FTX US.
At the time, the law firm stated that the assets it had managed to identify as belonging to the exchange were “substantially less than the aggregate third-party client balances suggested by the FTX US e-book.” In a separate filing, the firm also claimed that there was a significant asset shortfall in both FTX International and FTX US.
“These assertions by S&C are incorrect and are contradicted by later data in the same document,” Bankman-Fried said. “FTX US was and is solvent, probably with hundreds of millions of dollars in excess of customer balances.”
Bankman-Fried told the the same history on the US stock market both before and after the FTX Group filed for bankruptcy in November, as the assets of the two stock markets were separated. Similarly, John J. Ray III, the new head of FTX overseeing the bankruptcy, saying Congress last month that the assets of FTX US were separate from those of Alameda Research, with which FTX International had combined its funds.
In fact, Bankman-Fried claimed that FTX US has a positive balance sheet within the realm of $400 million in excess cash. He arrives at this figure by including the $428 million within FTX US bank accounts as an asset, which he claims Cromwell has not done.
The numbers
Specifically, the law firm filed client balances worth $497 million, surpassing the $181 million in digital assets that FTX US had identified associated with the exchange. Therefore, Cromwell concluded that FTX had a significant asset shortfall. However, by including the exchange’s bank account balance, this deficit becomes a surplus.
Furthermore, Bankman-Fried disputed that the customer balance figure of $497 million was out of date, taken before FTX US experienced massive withdrawals. Actually, he thought the number was around $199 million.
Comparing $609 million in total cash and digital assets against a customer balance figure of $199 million, Bankman-Fried concluded that FTX US had “at least $111 million, and probably around $400 million” in excess cash. before bankruptcy.
“FTX US is solvent,” he said. “Customers must have access to their funds.”
Of the $181 million in digital assets identified as being associated with FTX US, $90 million have missingaccording to stock market debtors on Tuesday.
Bankman-Fried has pleaded not guilty to charges of wire fraud, money laundering conspiracy and other accusations that suggest he misled investors. By contrast, former Alameda Research CEO Caroline Ellison and former Bankman-Fried right-hand man Gary Wang have pleaded guilty to similar charges.
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