Sam Bankman-Fried’s main international FTX exchange held just $900mn in easily sellable assets against $9bn of liabilities the day before it collapsed into bankruptcy, according to investment materials seen by the Financial Times.
The largest portion of those liquid assets listed on a FTX international balance sheet dated Thursday was $470mn of Robinhood shares owned by a Bankman-Fried vehicle not listed in Friday’s bankruptcy filing, which included 134 corporate entities.
The document, shared with prospective investors before the bankruptcy, provides a detailed picture of the financial hole in the FTX crypto empire and suggests customers of FTX international may face steep losses on cash and crypto assets they held on the exchange.
FTX’s collapse has delivered a powerful blow to a crypto industry already reeling from a string of corporate failures this year.
Bankman-Fried had been a leading figure in the sector and had presented himself as an entrepreneur keen to bring the wild west crypto market in line with mainstream regulation. The 30-year-old had secured backing from blue-chip investors, became a major donor to the US Democratic party and plastered his FTX exchange’s logo on the Miami Heat arena during his meteoric rise following the founding of his trading venue in 2019.
Bankman-Fried on Friday put his $32bn international exchange, along with FTX US and his trading firm Alameda Research, into bankruptcy proceedings in federal court in Delaware.
John J Ray, the veteran insolvency practitioner brought in to run the bankruptcy as FTX chief executive, said on Friday that the cryptocurrency group “has valuable assets” and that the bankruptcy proceedings would allow the company to “assess the situation and . . . maximise recoveries for stakeholders”.
The process has already run into issues after barely 24 hours, incorrectly listing entities FTX did not own in its initial filing and suffering an apparent hack on Friday night.
FTX declined to comment.
Friday’s bankruptcy filing provided few details on the group’s financial health but said both assets and liabilities range between $10bn-$50bn, and that the number of creditors exceeds 100,000.
A spreadsheet listing FTX international’s assets and liabilities, seen by the Financial Times, point at the issues that brought Bankman-Fried crashing back down to earth. It references $5bn of withdrawals last Sunday, and a negative $8bn entry described as “hidden, poorly internally labled ‘fiat@’ account”.
Bankman-Fried told the Financial Times the $8bn related to funds “accidentally” extended to his trading firm, Alameda, but declined to comment further. Earlier this week, he tweeted that FTX international had $4bn in easily tradeable assets when it faced Sunday’s $5bn surge of withdrawals.
“There were many things I wish I could do differently than I did, but the largest are represented by these two things: the poorly labeled internal bank-related acount [sic], and the size of customer withdrawals during a run on the bank,” the spreadsheet adds.
In the investment materials, FTX Trading Ltd, the company behind the main international exchange, is recorded as having liabilities of $8.9bn, the biggest portion of which is $5.1bn of US dollar balances.
Healthy companies typically have assets that match or exceed their liabilities. The spreadsheet says FTX Trading had a total of $9.6bn of assets, but it is unclear how much of that value could be realised.
The vast majority of FTX Trading’s recorded assets are either illiquid venture capital investments or crypto tokens that are not widely traded, according to the spreadsheet, which cautions that the figures “are rough values, and could be slightly off; there is also obviously a chance of typos etc. They also change a bit over time as trades happen.”
The company’s biggest asset as of Thursday was $2.2bn worth of a cryptocurrency called Serum. Serum’s market value was $88mn on Saturday, according to data provider CryptoCompare, suggesting FTX’s holdings would be worth far less if sold into the market. CryptoCompare’s figures take into account the coin’s liquidity.
On Friday, the Financial Times reported that Alameda and FTX between them had some $5.4bn of illiquid venture capital investments, according to other documents provided to investors earlier in the week.
Bankman-Fried had been racing to raise emergency funding but was unable to persuade investors to rescue his collapsed business empire.
The new investment materials show that he was seeking to raise $6bn-$10bn including from a convertible preferred stock paying a 10 per cent dividend that could later be converted into common equity in FTX international at a valuation of between $12bn-$15bn. “This is just a lower bound on the terms investors can get,” the materials add.
Until Friday afternoon, Bankman-Fried was looking to sell the $472mn of Robinhood shares, the largest liquid asset listed for FTX Trading, in privately negotiated deals he was arranging on the messaging app Signal, according to a person directly involved in the negotiations.
The person noted that the Robinhood shares were held by an Antigua and Barbuda entity called Emergent Fidelity, which is personally controlled by Bankman-Fried, according to US securities filings. Emergent Fidelity is not among the entities listed in Friday’s bankruptcy filing.
Bankman-Fried was entertaining offers at an about 20 per cent discount to Robinhood’s volume-weighted average price, or about $9 per share, said the investor, who ultimately declined to buy due to perceived legal risks.
Bankman-Fried acquired a 7.6 per cent stake in Robinhood in May and had intimated at considering a full acquisition of the popular trading app.
The second-biggest liquid asset was $200mn of cash held with Ledger Prime, a crypto investment firm owned by Alameda. The documents record no other US dollar balances held by FTX Trading.
In all, the spreadsheet says FTX Trading’s assets were $900mn of “liquid” assets, $5.5bn of “less liquid” assets consisting of crypto tokens, and $3.2bn of illiquid private equity investments. There is also an obscure $7mn holding called “TRUMPLOSE”. There are no bitcoin assets listed, despite bitcoin liabilities of $1.4bn.
Other documents provided to investors say that FTX US, Bankman-Fried’s onshore exchange, held $115mn of cash. Of that sum, $48mn was listed as corresponding to customer US dollar balances of $60mn.