Collapsed crypto exchange FTX will try to sell or restructure its businesses, its new chief executive said on Saturday as the company prepared to appear in US bankruptcy court.
“Based on our review over the past week, we are pleased to find that many of FTX’s regulated or licensed subsidiaries, inside and outside the United States, have balance sheets, responsible management and valuable franchises,” said John Ray III.
Ray succeeded FTX founder Sam Bankman-Fried as CEO when dozens of the group’s subsidiaries filed for bankruptcy protection on Nov. 11 after the company was unable to meet requests for billions of dollars in customer withdrawals.
FTX has subsequently said that it believes it may have more than one million creditors. It is set to appear at the start of bankruptcy court hearings in Delaware on Tuesday.
“[I]It will be our priority in the coming weeks to explore a sale, refinancing or other strategic transaction with respect to these subsidiaries,” said Ray.
FTX asked the court to allow it to keep confidential the names and identities of its creditors, arguing that FTX does not have traditional debtors and that disclosure of its customers would harm it competitively.
“Public sharing of a debtor’s customer list could give the debtor’s competitors an unfair advantage to contact and poach those customers,” FTX said.
FTX sought the bankruptcy court’s permission to pay outside vendors it said were necessary to keep its operations going while it tried to restructure. These include software providers as well as companies that provide security and storage of crypto assets. FTX has initially asked the court to approve $9 million in vendor payments.
In a separate application, FTX asked the court to approve a new cash management system. It said it had confirmed cash of $565 million but because it had only been able to verify balances in 144 of its 216 known bank accounts, it “did not yet know the total amount of cash.” [it] keep[s]”.
FTX announced that the firm has retained Perella Weinberg Partners as investment banker to work alongside attorneys at Sullivan & Cromwell and counsel from Alvarez & Marsal.
Ray cited two FTX US subsidiaries, Embed Clearing and LedgerX, as well as units in Japan, Turkey and the UAE as attractive assets. The US arm of FTX acquired Embed Clearing, a brokerage technology and infrastructure company, in June. It acquired LedgerX, an American derivatives platform, last October.
In a sentencing hearing Thursday, Ray detailed the chaos at Bahamas-based FTX, describing “a complete failure of corporate oversight and . . . complete lack of reliable financial information”.
Two other prominent cryptocurrency companies have filed for bankruptcy this year, Voyager Digital and Celsius Holdings. Like FTX, each tried to restructure or sell itself rather than seek immediate liquidation. Voyager had signed a deal to sell itself to FTX, but that is unlikely to go through given FTX’s current troubles.
Ray has vowed to investigate allegations of misconduct against Bankman-Fried and other executives.
Bankruptcy Judge John Dorsey will be asked on Tuesday to intervene in the conflict between Ray and the Bahamas.
The island nation has sought to retain jurisdiction over FTX Digital, an FTX subsidiary that is not one of the entities that have filed for bankruptcy in Delaware. FTX Digital faces bankruptcy proceedings in the Bahamas.
FTX wrote in a court filing earlier this week that there was “credible evidence that the Bahamian government is responsible for directing unauthorized access to the debtor’s systems for the purpose of obtaining the debtor’s digital assets – which occurred after these operations began.” [bankruptcy] issue”.
In a statement issued on Thursday, the Bahamas Securities Commission said that on November 12, it “took action to direct the transfer of all digital assets of FTX Digital Markets Ltd to a digital wallet controlled by the Commission, for safekeeping”.