The company tasked with locking down the assets of the failed cryptocurrency exchange FTX has said it has recovered and secured US$740 million in assets so far, a fraction of the potentially billions of US dollars likely missing from the company’s coffers.
The numbers were disclosed on Wednesday in court filings by FTX, which hired the cryptocurrency custodial company BitGo hours after FTX filed for bankruptcy on Nov. 11.
The biggest worry for many of FTX’s customers is that they could never see their money again.
Photo: AP
FTX failed because its founder and former chief executive officer Sam Bankman-Fried and his lieutenants used customer assets to make bets in FTX’s closely-related trading firm, Alameda Research.
Bankman-Fried was reportedly looking for more than US$8 billion from new investors to repair the company’s balance sheet.
Bankman-Fried “proved that there is no such thing as a ‘safe’ conflict of interest,” BitGo chief executive officer Mike Belshe said in an e-mail.
The US$740 million figure is from Wednesday last week. BitGo has estimated that the amount of recovered and secured assets has likely risen to more than US$1 billion since then.
The assets recovered by BitGo are locked in South Dakota in what is known as “cold storage” — cryptocurrencies stored on hard drives not connected to the Internet.
BitGo provides “qualified custodian” services under South Dakota law. It is the crypto equivalent of a financial fiduciary, offering segregated accounts and other security services to lock down digital assets.
Several crypto companies have failed this year, as bitcoin and other digital currencies have collapsed in value.
FTX failed when it experienced the crypto equivalent of a bank run, and early investigations have found that FTX employees intermingled assets held for customers with assets they were investing.
“Trading, financing and custody need to be different,” Belshe said.
The assets recovered include not only bitcoin and ethereum, but also a collection of minor cryptocurrencies that vary in popularity and value, such as the Shiba Inu coin.
California-based BitGo has a history of recovering and securing assets. The company was tasked with securing assets after the cryptocurrency exchange Mt. Gox failed in 2014. It is also the custodian for the assets held by the government of El Salvador as part of that country’s experiment in using bitcoin as legal tender.
FTX is paying BitGo a US$5 million retainer and US$100,000 per month for its services.
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