According to a filing recently filed by FTX debtors on March 16, the Sam Bankman-Fried companies had a $6.8 billion hole in their intercompany balance sheet when they filed for Chapter 11 bankruptcy protection. FTX and his conglomerate companies have debts of about $11.6 billion, including customer claims and other liabilities.
FTX $6.8 billion gap
FTX Debtors have released a third presentation that provides an overview of FTX’s debts and liabilities. The filing reveals that while a significant amount of money is owed to clients, FTX and its few subsidiary companies also owe funds to certain suppliers, counterparties and unpaid invoices. Some of the providers include Margaritaville Beach Resort, owned by Jimmy Buffett, Amazon Web Services (AWS), Fairview Asset Management, Stripe, Meta, Trulioo, Spotify, Turner Network Television, and American Express.
The advisers concluded that when FTX filed for bankruptcy, the more than 100 companies under its umbrella had a $6.8 billion gap on their balance sheet. About $4.8 billion of this amount is up against a colossal $11.6 billion, according to the filing. FTX US was running a deficit of about $87 million, despite repeated assertions by Bankman Fried that the US subsidiary was solvent. The disgraced FTX co-founder’s quantitative trading firm, Alameda Research, had the “vast majority of third-party loans,” according to the advisers’ notes.
Alameda had an interesting relationship with many entities and protocols, as it borrowed from “approximately 80 different counterparties.” Additionally, much of the collateral was based on FTT, SRM, and SOL, and the volatility of crypto assets “resulted in many lenders issuing margin calls and call notices.” FTX borrowers reviewed internal communications, chain activity, and loan documents and discovered that the loans were not recorded in FTX’s historical accounting records. “Additional tracking of wallet and blockchain activity remains an ongoing matter,” the advisers explained.
Forty-nine companies are ghost towns, identified as “inactive” because they have no historical payments or financial information. The advisers say that nine FTX entities provided their payment records directly and 12 FTX entities in Europe and Asia did the same. About 30 of the FTX entities used Quickbooks for operating books and records. As for political donations, “payments identified on the (Federal Election Commission’s) website that were not classified as donations in the debtors’ books and records,” the filing states.
Additionally, a page called “insider payments” shows that Bankman-Fried was paid approximately $2.247 billion. Former FTX engineering director Nishad Singh reportedly received $587 million, and FTX co-founder Gary Wang earned $246 million. Former FTX co-CEO Ryan Salame reportedly received $87 million and Sam Trabucco earned $25 million, according to FTX debtors. Former Alameda CEO Caroline Ellison received $6 million in payments and loans, as detailed in the insider payout spreadsheet.
In general, FTX debtors discovered significant financial and accounting discrepancies within the company, along with substantial payments made to insiders. The situation is opaque, but it is clear that FTX’s financial problems are more extensive than initially reported. The filing notes that the financial data was not audited and is subject to change as bankruptcy proceedings continue.
What do you think this means for the future of FTX and its subsidiaries? Share your thoughts and views in the comments below.
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