May 06, 2023 08:55
"The situation has stabilized, and the dumpster fire is out, announced FTX attorney Andy Dietderich during a hearing at a Delaware bankruptcy court.
According to our source (who has been 100% accurate with his information since we first spoke with them back in December of last year) FTX is in such a better position than anyone thought possible, re-starting the exchange is now on the table.
"The overwhelming majority of people currently involved with FTX want to see it up and running again" my insider said last night on Telegram, and then elaborated on what a perfect outcome would be for them "This could end up simply being a story of a company with a bad CEO, a problem that was fixed, but still has a happy ending where no business is forced to shut down, all the employees don't lose their jobs, and investors and customers end up with all the money they're supposed to have."
At this point I was a bit stunned... how did this whole situation go from sounding like one of the biggest disasters in the history of business, to something that could actually end with a healthy company, and everyone getting what is owed to them?
Here's how it could happen:
In mid-November when FTX filed for bankruptcy they owed $3.1 billion to its 50 largest creditors and at least $5 billion more to its nine million customers and smaller creditors.
At that time the company was able to find $3.3bn of assets... so, about $5 billion short. Pretty bad.
I think most people assumed there wouldn't be a dramatic change in those numbers, but those people would be wrong. Since then, Sam was booted out of the CEO position and a new team came in to clean up and go over everything.
For much of FTX's business there was no traditional record keeping, and it was their job to review emails, notes, chat logs, anything that contained business details, and create the proper accounting to go with them.
They found more than anyone thought possible...
Frankly, after we discovered the new team billing the bankrupt company for over $30 million for a single month of work, I was wondering if they were really doing enough to justify their price tag. Now it's a bit less shocking to see them charge millions if they’re discovering billions in FTX's assets.
Total funds available to FTX have more than doubled since they took over. In the 5 months they've been there they we're able to locate $800M in cash, along with $600M in “settlements and investments receivable”.
But the biggest surprise: FTX's huge crypto holdings, which then increased in value...FTX held way more than most people were expecting - $3.3 billion in crypto is currently sitting in FTX controlled wallets.
...and that gained over $1 billion in value as it sits there.
With FTX in very different circumstances than before, new options seem possible...
With the much improved circumstances FTX finds the business in, they have narrowed it down to two options.
Option 1: Pay back what they can, then close. Use the funds to pay off debts, then shut down FTX for good. Keep in mind, they're still about $1 billion short, with around $7 billion of the approximately $8 billion owed - people would get most, but not all of what they are owed.
Option 2: Re-open FTX. Conduct marketing research to find out if people would return to trade on FTX, now that Sam was out of the picture. If this shows it could be successful, and the largest debt holders are willing to wait, they could re-launch the exchange using some of the funds they currently have, and pay some of their debts with what is left. Then over time the remaining money owed would be paid out of future profits from the business.
Much of it will come down to how the public views the FTX brand, with Sam now removed...
This was a unique situation where even though you could argue that if Sam was even capable of doing what he is accused of, would have required others at FTX to have failed at their job, or been corrupt themselves - it seems like somehow 100% of the blame is directed at Sam, both from the public and law enforcement.
Sam Bankman-Fried Leaves an NY Court after a second batch of charges against him were added.Again, I know that's not true, but I have to remind myself that others have even officially pled guilty to felony crimes over this. FTX co-founder Gary Wang, and ex-Alameda CEO Caroline Ellison both plead guilty to federal fraud charges.
But then they did the opposite of Sam and avoided the spotlight, successfully too - we've heard nothing from or about them since late last year.
Next time we hear those names it will probably be as they're being used as witnesses against Sam.
In conclusion…
Remember - if they re-open the exchange they would also return user funds by putting those funds back onto the exchange, a powerful trick to get people to log back in.
Between that and my opinion that most people will see Sam's removal as the problems being 'fixed' - I think a successful future is absolutely possible for FTX.
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Author: Ross Davis
Silicon Valley Newsroom
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