The FTX bankruptcy team is struggling to track down all assets of the cryptocurrency exchange after it collapsed and filed for Chapter 11 on Nov. 10. 11. In a bankruptcy court hearing on Tuesday, an attorney for FTX said a significant amount of assets were missing or stolen, reported the Wall Street Journal.
The company’s new management is trying to chase down and recoup at least some of the billions of dollars that have passed through FTX and sister trading company Alameda Research.
Inexperienced, unsophisticated, compromised
“What we have here is a worldwide and international organization, but one that has been run as a personal fiefdom of (company co-founder and former CEO) Sam Bankman-Fried,” FTX Counsel James Bromley said Tuesday in a Delaware bankruptcy court. “FTX was under the control of inexperienced and unsophisticated individuals, and some or all were compromised.”
Bromley described the fall of FTX as “one of the most abrupt and difficult collapses in the history of corporate America and in the history of corporate entities worldwide.”
FTX has attracted millions of individual and institutional clients. Lawyers aren’t sure if the recoverable assets will be enough to meet the obligations. Court documents show the 50 largest creditors are more than $3 billion in debt. The FTX team said it will take months to resolve customer complaints and Alameda’s risky operations. Meanwhile, client funds on the exchange remain frozen.
And in further testimony to SBF’s mismanagement, court documents last week revealed that one of FTX’s units spent $300 million in corporate funds on homes in the Bahamas for former senior staffers and Bankman’s parents – Fried.
Now, new CEO John J. Ray III, who oversaw Enron’s bankruptcy liquidation, is tasked with getting what funds he can back for investors and customers. It may be his toughest test yet. “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of reliable financial information,” he said previously.
Beyond FTX: Bitcoin battle test
But while Bankman-Fried appears to have gotten too close to the sun, Cathie Wood still believes Bitcoin is going to the moon.
Wood, founder and CEO of ARK Investment Management, is maintaining her Bitcoin price goal of $1 million per coin by 2030, she told Bloomberg Businessweek on Tuesday evening. Though the world’s largest cryptocurrency hit two-year lows on Monday.
“Sometimes you have to test battle. You have to go through crises to see survivors, to test infrastructure and thesis. We think Bitcoin is coming out of all of this smelling like a rose,” Wood said.
“If you look at the blockchain… the infrastructure, the technology hasn’t skipped a beat throughout the entire crisis,” he said. Wood points to Bitcoin’s hash rate, at an all-time high, as a testament to security. And the total value of Ethereum staked is at an all-time high of $24 billion.
Wood is putting his money where his mouth is, snapping up tatty shares of Coin basis (COIN) stock e Grayscale Bitcoin Trust (GBTC).
Ark Next Generation Internet ETF (ARKW) and ARK Innovation ETF (ARKK) funds together bought nearly 177,000 shares of GBTC on Monday worth $1.5 million. This comes after ARKW bought more than 315,000 shares of GBTC worth about $2.8 million on Monday, Bloomberg reported.
From Nov. 9, the two funds purchased approximately 1.3 million shares of COIN, valued at $56 million based on Tuesday’s closing price, bringing its total holdings to 8.37 million shares.
“I think Coinbase will come out very strong, they just lost a major competitor in FTX,” Wood said in the Bloomberg interview.
Coinbase’s current share prices are likely lower due to fear and lack of understanding of cryptocurrencies, he said. However, crypto is unlikely to face a “Lehman moment” because the scale is much smaller. And while the FTX situation “was a fraud,” Wood predicted the claims will ultimately fall far short of those of the Bernie Madoff scandal.
Meanwhile, decentralized financial platforms, which use secure, distributed ledgers similar to cryptocurrencies, are set to take off due to increased transparency and lower counterparty risk, Wood says.
COIN and GBTC now make up ARK’s 14th and 41st largest holdings, across all of its funds, according to the company’s latest data.
Bitcoin surged above $16,500 on Wednesday afternoon. COIN shares were up 5% on market close after jumping 5.2% on Tuesday. And GBTC shares jumped 9.3% after gaining 2% on Tuesday.
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