FTX Faces Cash Shortage: Selling Cryptocurrency to Resolve Customer Disputes, Cash Reserves Amount to $4.4 Billion.
FTX, a cryptocurrency exchange, is reportedly making significant efforts to sell assets in order to repay its customers. However, the process has encountered numerous obstacles, prompting FTX to carefully consider each move it makes.
In a recent move, FTX has strategically aimed to increase its cash reserves to $4.4 billion by the end of 2023. This involved selling off crypto assets and engaging in Bitcoin derivative trades, demonstrating the company’s commitment to resolving its financial challenges.
FTX’s major affiliates, including FTX Trading Ltd. and Alameda Research LLC, played a significant role in contributing to the cash pile, nearly doubling it from around $2.3 billion in late October 2023.
While a representative for FTX declined to comment on the matter, monthly operating reports under Chapter 11 bankruptcy shed light on the financial maneuvers.
It is important to note that, despite FTX’s efforts, customers may not receive full compensation. Claims from customers have increased from trading at approximately 38 cents on the dollar in October to about 73 cents on the dollar as of Friday, following the platform’s shutdown in November 2022.
As a result, bankruptcy lawyers are working diligently to recover assets and negotiate deals that benefit customers whose smaller accounts were affected by FTX’s failure.
In a court filing, FTX revealed that it raised $1.8 billion by selling off some of its digital assets until December 8. The company also engaged in Bitcoin derivative trades as a risk management strategy and to generate additional returns on its digital holdings. FTX is actively exploring options to potentially resume its exchange operations.
However, FTX has cautioned that customers may not be fully compensated despite these efforts. The company has proposed valuing assets at their bankruptcy filing prices, excluding potential gains from a Bitcoin rally.
This approach has sparked controversy, with numerous FTX customers challenging the proposal, particularly concerning the valuation of digital assets at the time of the bankruptcy filing.
FTX’s strategic cash reserves, along with ongoing legal battles and challenges from customers, highlight the complex landscape the crypto firm faces as it endeavors to meet its financial obligations and navigate its way forward amidst the bankruptcy proceedings.