Legal filings have revealed that collapsed crypto exchange FTX owes its 50 biggest creditors more than $3 billion — and it could take them years to get even a small portion of it back.
In the filings, released on Sunday, the company said it owed a minimum of $100 million to each of its 10 largest creditors and the top 50 are all due northwards of $20 million.
As reported by the Financial Times (FT), these creditors are likely to comprise a variety of hedge funds, traders, and asset managers with exposure to FTX Group or the firm’s own FTT token.
According to data provider, Crypto Fund Research (CFR), somewhere between 100 and 150 crypto hedge funds could have direct exposure to FTX or its coin. That’s as much as 40% of the total number of such funds.
By CFR’s reckoning, the affected firms, which include Genesis trading and BlockFi, have an average exposure to these funds of between 7% to 12% of their total assets under management (AUM).
Earlier this month, Travis Kling, founder of Ikigai Asset Management tweeted, “I lost my investors’ money after they put faith in me to manage risk and I am truly sorry for that,” (our emphasis).
He added, “I have publicly endorsed FTX many times. I was wrong.”
According to other affected parties, FTX was able to tempt so many of its eventual victims due to its image and reputation as the exchange investors could trust.
“FTX was the pinnacle, the most beautiful girl in the class,” said fund manager Anders Kvamme Jensen.
“They were seen as a sophisticated and clean counterparty, an image that was the main driver behind its success,” (via FT).
And now they may be forced to wait for or even forfeit their trapped funds. A week ago, Kevin Zhou, co-founder of hedge fund Galois Capital was forced to break it to investors that around half of his firm’s assets – around $100 million – were trapped on FTX.
And the bad news kept coming when he also told them in a letter that, while he was “deeply sorry,” he had “under-appreciated the solvency risk” and said it could take years to recover “some percentage of our assets.”
Even FTX sponsorship partners are feeling the heat
FTX’s dramatic implosion continues to send shockwaves through the wider crypto industry and is starting to hit home in some decidedly odd ways.
As reported by news outlet Proactive, US basketball champions the Golden State Warriors are being sued by an FTX customer who blames the team for enticing him to invest in the troubled exchange.
Last December, the Warriors signed a deal with FTX which described the firm as the ‘Warriors’ Official Cryptocurrency Platform.’
In a writ that also names FTX founder Sam Bankman-Fried and Alameda Research CEO Caroline Ellison, Canadian investor Elliot Lam says the Warriors falsely advertised FTX as a “viable and safe way to invest in crypto.” He says he wants $750,000 in return.
The team has scrapped FTX-related promotions while another sporting giant, Miami Heat, has decided to drop the FTX name from its stadium.