Two days ago, FTX’s bankruptcy administrators and debtors released an update for unsecured creditors claiming the discovery of $5.5 billion in liquid assets. Approximately $3.5 billion of these funds are cryptocurrency assets, with 11 different digital currencies classified as “liquid assets.” However, two of the company’s main cryptocurrency caches are not liquid, as the company’s 47.51 million SOL tokens are locked up and the company’s FTT balance distorts the realization of actual liquidity due to control of FTX of more than 80% of the supply.
Blocked Solana and Iliquid FTT assets to complicate FTX bankruptcy process
On January 17, 2023, FTX debtors published a press release and visual presentation of the assets discovered since the company filed for Chapter 11 bankruptcy protection on November 11, 2022. FTX debtors claim to have found $5.5 billion through a “herculean research effort.” ”, with $3.5 billion allegedly being crypto assets. The visual presentation explains that FTX controls around $685 million in sunny (SUN) tokens, roughly 47,511,173 SOL, and using today’s SOL exchange rate, that cache is worth well over $685 million.
However, the SOL owned by FTX debtors is blocked and this aspect is not mentioned in the visual presentation shown to unsecured creditors. It was reported that FTX/Alameda managed to buy 16% of the SOL supply from the Solana Foundation, but there is a lock-in schedule. The current stash of 47.51 million SOL is equivalent to 8.82% of the total supply that the Solana network will eventually emit over time. Currently, there are only 370,992,365 SOLs in circulation and that does not represent the 47.51 million blocked SOLs owned by the liquidators.
The problem with calling this cache liquid SOL is that it is locked up and subject to a linear grant until 2025-2027, and it could be years before the funds can be accessed. In addition, the stash of the debtors of ftx token (FTT), a coin originally created by the FTX core team, is also not liquid because FTX controls more than 80% of the total supply. For example, Ethereum (ETH) address “0x97f” controls 45,850,883 FTT, worth more than $1.8 billion at current exchange rates. The FTX debtors’ filing shows that the FTT has $529 million worth of FTT tokens.
The Solana locked issue and the fact that FTX owns most of the FTT in circulation puts these tokens more on the side of being something. This could complicate the bankruptcy process and payments to creditors because it would be difficult to convert these assets into cash or other crypto assets without significantly affecting the market price.
Even if SOL were to be unlocked, throwing 47.51 million SOL into the market would cause disruption. Furthermore, FTT suffers from low trading volume, limited exchange listings, few use cases, and the company controls most of the FTT supply. Because FTX owns a significant amount of the total FTT supply, it can easily affect the ability to trade it. Calling these SOL and FTT token caches “liquid” is questionable as the data does not support that definition.
What do you think about FTX’s discovery of $5.5 billion in liquid assets, despite the presence of locked up SOLs and illiquid FTT holdings? How do you think this will affect the bankruptcy process and payments to creditors? Share your thoughts in the comments section below.
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