FTX’s Cash Crisis: Unloads Cryptocurrency to Settle Customer Claims, Cash Reserves Reach $4.4 Billion
According to a Bloomberg report, FTX is trying a sell-to-pay approach to help it return money to customers. However, many problems have arisen along the way, so FTX is making every move count.
Understanding FTX’s Sell-to-Pay Approach
Recently, FTX took strategic steps to increase its cash reserves to $4.4 billion by the end of 2023. The actions included selling cryptocurrency assets and engaging in Bitcoin derivatives trading, highlighting the company’s efforts to address its financial woes.
FTX Trading Ltd. FTX’s four major subsidiaries, including and Alameda Research LLC, have contributed significantly to this cash pile, which has nearly doubled from about $2.3 billion at the end of October 2023.
FTX representatives declined to comment on the matter, but monthly operating reports following the Chapter 11 bankruptcy revealed financial maneuvering.
In particular, FTX’s efforts may result in Customer not receiving full compensation. Since the platform went down in November 2022, customers’ bills have increased from about 38 cents on the dollar in October to about 73 cents on the dollar as of Friday.
As a result, bankruptcy lawyers are working hard to close deals that will help recover assets and help customers with smaller accounts as a result of FTX’s failure.
FTX said in a court filing that it had raised $1.8 billion as of December 8 by selling some of the company’s digital assets. The company has also engaged in Bitcoin derivatives trading as a risk management strategy and generate additional returns on the digital asset. FTX is actively exploring options to potentially resume exchange operations.
Impact on FTX Customers and Creditors
Despite these efforts, FTX warned that customers may not receive full compensation. The company proposed valuing its assets at the bankruptcy filing price, excluding any potential gains from Bitcoin’s rise.
This approach has sparked controversy, with dozens of FTX customers objecting to the proposal, particularly over its impact on digital asset valuations at the time of bankruptcy filing.
FTX’s strategic cash hoarding, combined with ongoing legal battles and customer challenges, highlights the complex environment the cryptocurrency company faces as it seeks to resolve its financial obligations and move forward during bankruptcy proceedings.