According to a presentation recently submitted by the FTX debtors on March 16, Sam Bankman-Fried’s companies had a $6.8 billion hole in their intercompany balance sheet when they filed for Chapter 11 bankruptcy protection. FTX and its conglomerate of firms have debts of around $11.6 billion, including customer claims and various other liabilities.

FTX’s $6.8 Billion Gap

The FTX debtors have released a third presentation that provides an overview of FTX’s debts and liabilities. The presentation reveals that, while a significant amount of money is owed to customers, FTX and its few subsidiary firms also owe funds to certain vendors, counterparties, and unpaid invoices. Some of the vendors 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.

Advisers concluded that when FTX filed for bankruptcy, the more than 100 companies under its umbrella had a $6.8 billion gap in their balance sheet. Approximately $4.8 billion of this amount is against a colossal $11.6 billion, according to the presentation. FTX US had a shortfall of about $87 million, despite Bankman Fried’s repeated claims that the U.S. subsidiary was solvent. The disgraced FTX co-founder’s quantitative trading firm, Alameda Research, held 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.” Furthermore, much of the collateral was based in FTT, SRM, and SOL, and crypto asset volatility “resulted in many lenders issuing margin calls and call notices.” FTX debtors reviewed internal communications, onchain activity, and loan documents and discovered that loans were not recorded in FTX’s historical accounting records. “Additional tracing of wallet and blockchain activity remains an ongoing matter,” the advisers explained.

Forty-nine companies are ghost towns, identified as “dormant” because they have no historical payments or financial information. Advisers say 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 to keep operational books and records. Regarding political donations, “payments identified on [Federal Election Commission] website that were not classified as donations on the debtors’ books and records,” the presentation notes.

Additionally, a page called “payments to insiders” shows Bankman-Fried was paid roughly $2.247 billion. Former FTX director of engineering Nishad Singh reportedly received $587 million, and FTX co-founder Gary Wang earned $246 million. Former FTX co-CEO Ryan Salame allegedly received $87 million, and Sam Trabucco made $25 million, according to FTX debtors. The former Alameda CEO, Caroline Ellison, received $6 million in payments and loans, as detailed in the payments to insiders spreadsheet.

Overall, FTX debtors discovered major financial and accounting discrepancies within the company, along with substantial payments made to insiders. The situation is opaque, but it’s evident that FTX’s financial problems are more extensive than initially reported. The presentation notes that the financial data was not audited and is subject to change as the bankruptcy proceedings continue.

What do you think this means for the future of FTX and its subsidiaries? Share your thoughts and insights in the comments below.

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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

FTX Debtors and affiliate Alameda Research Ltd. have filed a lawsuit against Grayscale Investments, seeking injunctive relief to unlock $9 billion in value for shareholders of the Grayscale Bitcoin and Ethereum Trusts. The debtors allege that “Grayscale has extracted over $1.3 billion in exorbitant management fees in violation of the trust agreements.”

FTX Debtors Accuse Grayscale of Exorbitant Management Fees and Breach of Trust Agreements

In a press release issued March 6, 2023, FTX debtors and Alameda Research, the company’s now-defunct quantitative trading firm, announced that Alameda is suing digital currency fund manager Grayscale Investments. Alameda seeks injunctive relief to allow redemptions and reduce fees associated with the Grayscale Bitcoin and Ethereum Trusts. The debtors allege that Grayscale and its management team continue to “breach trust agreements and fiduciary duties.”

Alameda also argues that Grayscale’s self-imposed redemption ban prevents the “realization of approximately $9 billion of value.” The firm’s CEO and chief restructuring officer, John J. Ray III, issued a statement regarding the lawsuit against Grayscale, stating: “We will continue to use every tool we can to maximize recoveries for FTX customers and creditors.” The FTX debtors restructuring officer added:

Our goal is to unlock value that we believe is currently being suppressed by Grayscale’s self-dealing and improper redemption ban. FTX customers and creditors will benefit from additional recoveries, along with other Grayscale Trust investors that are being harmed by Grayscale’s actions.

The lawsuit against Grayscale follows Alameda’s lawsuit against Voyager Digital at the end of January 2023. The complaint alleged that Voyager received preferential transfers of property from Alameda Research, and the firm sought to recover approximately $445.8 million from the bankrupt entity. Voyager agreed to set aside the $445 million to pay Alameda, and both parties agreed to participate in nonbinding mediation.

The press release from FTX debtors alleges that for years, Grayscale has “hidden behind contrived excuses” to prevent shareholders from redeeming their shares. It also noted that the Bitcoin Trust (GBTC) has been trading 50% below net asset value (NAV). GBTC statistics on Tuesday show a current 42.11% discount to NAV.

“If Grayscale reduced its fees and stopped improperly preventing redemptions, the FTX debtors’ shares would be worth at least $550 million, approximately 90% more than the current value of the FTX debtors’ shares today,” the complaint against Grayscale concludes.

What do you think will be the outcome of the lawsuit against Grayscale Investments? Share your thoughts in the comments section below.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.