Over the news, the most prominent theme regarding the FTX saga is their court case, which could see the founder and former CEO of the crypto exchange paying fines and going to jail. But behind the scenes, the embattled team of the failed FTX exchange has been working very hard to recover the crypto exchange.
The collapse of FTX was primarily due to the misappropriation of funds, resulting in the exchange filing for bankruptcy. The team managing the bankruptcy proceedings aims to facilitate an FTX recovery by recovering and settling the investments of affected customers and investors. This step is crucial to ensure that those impacted by the collapse of the crypto exchange receive their due compensation.
FTX has made incredible progress with its misappropriated funds' recovery, claiming to have recovered more than 70 percent of the funds that went missing in the exchange. Just a few billion to go, and the crypto community could potentially see FTX exchange operating again.
Sources close to the failed exchange have reported that approximately $7 billion in liquid assets have been recovered thus far. However, efforts to locate additional missing funds within the crypto exchange are ongoing. In the FTX Debtors' second interim report, CEO John Ray stated that while the recovery team is progressing in achieving its objectives, they continue to face significant challenges.
Individuals who have invested in FTX are presently claiming that the crypto exchange has mishandled a staggering $8.7 billion of their funds. The individuals, known as the FTX Debtors, have stated that a significant portion of the affected clients' assets consisted of stablecoins and fiat. Of the $8.7 billion, approximately $6.4 billion was in fiat or stablecoin.
During the court proceedings, it was discovered that FTX made a significant accounting error by failing to distinguish between customer funds in fiat and those in stablecoins.
Misuse of Customers Deposits Intentional
The FTX debtors claimed that the former executives intentionally misappropriated and misused customers' funds before the FTX collapse. According to the debtors' report, the FTX former leadership "did not commingle and misuse customer deposits by accident." The misuse of customer's funds happened "with the assistance of a senior FTX Group attorney," FTX debtors alleged in their second report.
So what are the consequences of the misappropriation of funds by the former FTX management?
According to the report, it says, "Notwithstanding extensive work by experts in forensic accounting, asset tracing and recovery, and blockchain analytics, among other areas, it is extremely challenging to trace substantial assets of the Debtors to any particular source of funding, or to differentiate between the FTX Group's operating funds and deposits made by its customers."
The report further alleged that the funds were used to make massive political and charity donations." The FTX Senior Executives [SBF, Gary Wang, and Nishad Singh] and [Alameda Research CEO Caroline] Ellison informally tracked the size of FTX.com's undisclosed fiat currency liability to customers that resulted from the extensive commingling and misuse of FTX.com customer deposits," the report said.
While FTX recovery seems to be in the right direction, many hurdles are still waiting to be crossed. When all the funds are recovered, then maybe the crypto community might see the relaunch of FTX.