A Closer Look at FTX’s Most Recent Bankruptcy Documents

The longer John J. Ray III leads FTX through bankruptcy, the more fantastic the story of FTX’s collapse becomes.

On March 2, FTX published a press release detailing a presentation filed for the exchange’s Chapter 11 bankruptcy case, citing a “massive shortfall” in assets.

How massive? CoinDesk reported on the shortfall last week (worth $2.2 billion and counting), but some additional context is useful in highlighting just how massive and shocking the shortfall became.

The deficit at FTX and its MAPS problem

The filing broke up assets into two categories: Category A and Category B. Category A assets are tokens with a market capitalization of at least $15 million and an average daily trading volume of at least $1 million. Category B assets are tokens that don’t meet that criteria or are largely held or controlled by the estate (i.e. FTX).

Category A assets include cryptocurrencies and assets like bitcoin (BTC), ether (ETH) and cash.

A cursory look at just those two assets for FTX (which does not include FTX US) reveals something really beyond comprehension. The identified deficit between customer payables, which are customer balances, and total assets, which are assets the bankruptcy team has located plus the amount of customer balances owed to FTX, was $1.6 billion in bitcoin and $870 million in ether. Add on the shortfall in cash and stablecoins of $6.4 billion and you’re left with an utterly outstanding deficit.

And that deficit isn’t bad simply because of its absolute amount, but also because of the relative amount it represents in the context of all holdings, especially when looking at bitcoin. See, FTX owes customers $1.6 billion in bitcoin, and it has only $6 million of it on hand.

Six million dollars is not a typo. Million.

That’s a more than 250 times difference.

What exactly was FTX selling its customers when customers bought bitcoin on its platform?

If you look at Category B assets, it gets even stranger. Here, FTX boasts a surplus between what it owes customers and what it has on hand.

Most of that surplus is made up of a $1 billion MAPS holding. That sounds great until you realize that MAPS’s current market capitalization of circulating tokens is between $2 and $3 million, according to CoinMarketCap and CoinGecko. So FTX is missing about $1 billion of the $1 billion it claims to have. It’s missing because most of that $1 billion is attributed to the project’s fully diluted value, which represents the value of a project if all the tokens outstanding enter circulation, a figure that sits at about $450 million.

The implication here is that FTX holds almost the entirety of that token’s value and presumably it will sell its MAPS to make up the documented shortfall across other assets. Of course, who knows what the value of the tokens will be when it starts to sell almost all of them?

FTX US is better, but still …

Looking at FTX US is equally mind numbing.

There is far less of a shortfall at FTX US, and some of it might even be excusable, like a $2 million gap on $66 million of owed bitcoin. Maybe the $31 million shortfall on $38 million of owed ETH is bad, but whatever.

The strangest part of the FTX US schedule has to do with Solana (SOL). The bankruptcy team has located exactly zero of the $19 million the company owes customers.

(Note: the “-” in the above graphic is the accounting notation for actually zero, not something that is less than a million since the schedule is presented in millions rather than in actuals.)

How does FTX US have no Solana for customers? Zero. That feels incredibly, uhm, irresponsible.

The last bit worth sharing from the filing is a pretty jarring disclosure that I will simply present without comment. As it shared this information, the company said that it isn’t possible to predict customer recoveries because (among other reasons):

What a mess.

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