A Failing FTX Owes Nearly More Than $3 Billion To Top 50 Investors
FTX's top investors could be out billions following the cryptocurrency exchange's spectacular collapse. The company, which was co-founded by a man once referred to as the "King of Crypto," filed for bankruptcy on November 11. Hours after the filing, the company was the target of a hack that resulted in hundreds of millions of dollars worth of digital currency going missing. The circumstances leading up to the bankruptcy, and the subsequent hack, are still being investigated by numerous government bodies. However, there is a strong indication of how it all went wrong.
Like many successful exchanges, FTX developed a cryptocurrency of its own called FTT. The firm also had a sister company, which was where founder Sam Bankman-Fried initially built his fortune, Alameda Research. By the time of the collapse, most of Alameda Research's value was based on its stocks of FTT. On top of that, the people running FTX are alleged to have funneled customer funds to Alameda, which were then used to fund its ventures. When rumors of funds being mishandled came to light, customers attempted to pull their money from FTX. The exchange didn't have the funds to cover the withdrawals and was forced to file for bankruptcy. Now details are emerging about just how much some customers could potentially lose.
FTX's top investors may lose up to $3.1 billion
The failed crypto exchange's top 50 investors are allegedly owed $3.1 billion, with the top 10 being owed around $1.45 billion of that. Fortune says that the affected customers have not been named, but the amounts have been confirmed in documents filed in court over the weekend. The papers go on to break things down further. One individual, who is the company's biggest creditor, is owed $226 million, and 10 customers had at least $100 million each lodged with the firm. The smallest claim on the list of 50 is still $21 million.
Saturday's filing only lists the top 50 creditors, but that is just a fraction of the people who have money tied up in FTX. Some estimates put the number of creditors the exchange owes money to at over a million. Those creditors will have the opportunity to get involved with the bankruptcy proceedings and suggest how they would like to recoup their money — but there are no guarantees it will be paid back. A large portion of the creditors are the firm's customers, and their debt tends to be unsecured, which is a term used when money is lent without collateral being taken.
With secured debt, like the kind you would get from a bank, the borrower usually has to offer some kind of collateral that acts as an insurance policy should they lapse on the payments. On a personal level, this would be like securing a loan against your house or car. FTX customers don't have that luxury, so may only receive some or even none of their investment back, depending on how much FTX still has in assets.