With between 100,000 and one million creditors of its own, FTX and Alameda Research’s bankruptcy has hit its customers hard, but the damage is spreading far and wide through crypto.
The bankrupt FTX Group could have more than one million creditors, its new management told a bankruptcy court judge in Delaware.
In a Nov. 14 filing, attorneys for the company revealed that simply compiling standard lists of the 20 top creditors for the roughly 130 companies under FTX Group, including FTX, FTX US and Alameda Research’s umbrella would overwhelm the team brought in by the firms’ new CEO, restructuring expert John J. Ray III.
Noting that “the debtors operated the world's second largest cryptocurrency exchange (through its FTX.us and FTX.com platforms), operated one of the largest market-makers in digital assets (through Alameda Research LLC and its affiliates), and conducted diverse private investment and other businesses,” its attorneys said.
They added:
“There are over one hundred thousand creditors in these Chapter 11 Cases. In fact, there could be more than one million claims against the debtor.”
So many of those overlap among the swatch of related companies that a single top 50 list would be a better choice, they added.
On top of that, the new leadership team said that on top of the three main U.S. agencies investigating FTX and its former leadership — the U.S. Attorney’s office in New York, the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) — it has been contacted by “dozens of Federal, state and international regulatory agencies.”
The damage spreads
The fallout from FTX’s bankruptcy has gotten wider and wider, drawing in creditors that range from sports sponsorships like the Miami Heat — that $135 million FTX Arena naming deal won’t be paying off — to the companies Sam Bankman-Fried had rescued from earlier insolvencies.
Other leagues and teams it sponsored include Major League Baseball, Mercedes’ Formula 1 team, UC Berkeley’s stadium and several huge deals with esports teams.
Those include Liquid Global, the Japanese exchange Bankman-Fried backstopped with a $120 million loan after a $90 million hack before acquiring it. On Nov. 14 it halted withdrawals, four days after crypto lender BlockFi, which Bankman-Fried had kept out of insolvency in the wake of Three Arrows Capital’s collapse with a $400 million line of credit.
While BlockFI said “rumors that a majority of BlockFi assets are custodied at FTX are false,” at the time, on Nov. 15 the Wall Street Journal reported that it is preparing for a potential bankruptcy filing of its own due to “significant exposure” in the form of assets held on FTX and loans made to Alameda.
Also that day, crypto lender SALT halted withdrawals because FTX’s collapse “has impacted our business.”
CEO Shawn Owen took to Twitter to say that it was not “a notice of going bust.” He added:
“We are pausing to deal with the fall out of FTX and to confirm that none of our counter parties have any additional risks so that we can proceed with maximum caution with all efforts directed at not going bust.”
The Solana Foundation, an "Ethereum killer" whose blockchain had already been buffeted by problems including several crashes. While it has less than $1 million on FTX — less than 1% of its balance sheet — but it also had large investments in FTX Trading and FTT tokens, which are down almost 95% in the past 10 days. It also had a big stake in a Solana DEX founded by Bankman-Fried.
Worse, strong ties to Bankman-Fried, FTX and Alameda have slammed its SOL token, which is down 60%, Decrypt said.
Locked Away
Among the worst hit are crypto broker Genesis Trading’s derivatives arm, with $175 million locked in FTX, hedge fund Galois Capital with $100 million locked and Galaxy Digital Holdings, with $76.8 million. Asset manager CoinShares has $30.3 million,” Reuters reported.
Genesis Trading has temporarily frozen withdrawals as of Nov. 16.
Then there’s Binance, which only sold a small portion of the $580 million worth of FTX’s FTT token it held after CEO CHangpeng “CZ” Zhao’s announcement that it would sell off that holding sparked the run that brought down Bankman-Fried’s empire.
And New Hou technologies, the holding company formerly known as Huobi Global, has $18.1 million stuck, including $13.2 million in customer funds. However, the unrelated Huobi exchange says it is not impacted, Cointelegraph reported.
Adding insult to injury, bankrupt crypto lender Celsius has told the court that it is owed $12 million by FTX — which is admittedly a pittance compared to the roughly $1.2 billion hole in its own balance sheet, affecting hundreds of thousands of investors.
FTX Group-backed DeFi projects MAPS.ME and Oxygen said that while the company did not have any equity in their projects, the exchange “acted as custodian for over 95% of the overall supply of our ecosystem tokens,” leaving uncertain where they stand, according to a Medium post.
Several companies have been buffeted by rumors of FTX exposure.
Crypto.com CEO Kris Marszalek had to reassure customers that all but $10 million of the $1 billion it had sent to FTX had been recovered, it added.
