Summary
- FTX, a cryptocurrency derivatives exchange, has revealed a ‘massive shortfall’ in its assets.
- The exchange has been accused of misappropriating funds and engaging in fraudulent activities.
- FTX has promised to make up the shortfall and has taken steps to increase transparency.
Cryptocurrency exchange FTX has revealed a massive shortfall in its digital asset and fiat currency holdings, with billions worth of customer funds missing from both the exchange and its United States-based arm, FTX US.
According to a presentation released by the exchange on March 2, FTX had $2.2 billion in exchange wallets and fiat accounts, of which $694 million consisted of the most liquid “Category A Assets” that include cash, stablecoins, Bitcoin (BTC) and Ether (ETH). However, only $191 million of total assets were located in the wallets of the accounts associated with FTX US.
The exchange also recorded an $8.6 billion deficit across all wallets and accounts while FTX US recorded a deficit of $116 million. FTX wallets showed a $9.3 billion net borrowing by the exchange’s sister trading firm, Alameda Research, and a $107 million net payable to Alameda from FTX US.
John J. Ray III, the chief restructuring officer and CEO of FTX, said in a statement that it has taken a huge effort to uncover the facts of this situation. He added that the exchanges’ assets were highly commingled, and their books and records are incomplete and, in many cases, totally absent.
The news follows a number of Bankman-Fried’s close associates reportedly agreeing to cooperate with U.S. prosecutors in recent months. Former FTX engineering director Nishad Singh also pleaded guilty to charges of wire fraud along with wire and commodities fraud conspiracy on February 28.
The bankruptcy of FTX has left many customers in the dark, with the exchange’s deficit of $8.6 billion leaving them without their funds. It remains to be seen how FTX will address the shortfall and if customers will be able to recover their funds.