FTX Shows Massive Shortfalls in Firm’s Assets

2023-03-30, 04:34

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![](https://gimg2.gateimg.com/blog/1679447253500249423shendu.jpeg)
## [TL; DR]
The financial records of FTX and FTX.US show that the two entities have huge financial deficits.

The FTX Debtors are the ones that unearthed FTX’s massive financial shortfalls.

FTX Japan and GameStop (GME) have promised to refund their customers.

## Introduction 
The FTX crash is one of the most notable developments [that negatively affected the crypto sector in 2022](https://www.gate.io/explore/ftx-sbf "that negatively affected the crypto sector in 2022"). This mishap is still affecting many decentralized projects as well as influencing decision making at different levels. For instance, most national governments are working on introducing and enforcing relevant crypto regulation in a bid to prevent  similar scenarios.

## Deficits in wallets and fiat accounts 
The ongoing investigation on the causes of collapse of FTX crypto exchange has shown deficits in its digital wallets and fiat accounts. There are also shortfalls in the accounts of FTX.US, a sister company of FTX crypto exchange.

![](https://gimg2.gateimg.com/image/article/1680150505461680150219_.pic.jpg)
FTX crypto exchange- CNBC

The FTX Debtors revealed massive gaps in the financial records of the two companies during their presentation for the FTX Bankruptcy case. The financial investigation showed that FTX has $2.2 billion worth of assets, of which most of them are illiquid. According to the presentation, only $694 million worth of assets including <a href="/de/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a>, Ether and other cryptocurrencies are liquid.

Read also: [Britain Sets to Regulate the Crypto after FTX Collapse](https://www.gate.io/blog_detail/2268/britain-sets-to-regulate-the-crypto-after-ftx-collapse "Britain Sets to Regulate the Crypto after FTX Collapse")

FTX’s customer receivables amount to $385 million while there is $9.3 billion net borrowing from Alameda Research, its sister company. However, the investigators have made it clear that the findings are not conclusive due to the nature of financial data on hand. There is a possibility that the team may unearth other discrepancies.

Commenting on the state of the financial record available, John J. Ray III, the Chief Executive Officer and Chief Restructuring Officer of the FTX Debtors [said](https://www.prnewswire.com/news-releases/ftx-debtors-publish-second-presentation-for-stakeholders-301761345.html "said"), "It has taken a huge effort to get this far. The exchanges' assets were highly commingled, and their books and records are incomplete and, in many cases, totally absent.  For these reasons, it is important to emphasize that this information is still preliminary and subject to change.”

In a press release, the investigation team added, “The presentation also provides information on how FTX's prepetition management commingled assets, using FTX.com and FTX.US sweep wallets to store, borrow and lend digital assets for the proprietary account of the FTX Debtors and related parties, including employees, suppliers, vendors and business partners, as well as exchange customers.”

Read also: [Key lessons from the Collapse of FTX and the Implosion of FTT](https://www.gate.io/blog_detail/1804/key-lessons-from-the-collapse-of-ftx-and-the-implosion-of-ftt "Key lessons from the Collapse of FTX and the Implosion of FTT")

The investigators also noted that there were several unauthorized transactions that were made. For FTX USA, the total value of funds withdrawn from its wallets through unauthorized transactions amounts to $293 million. On the other hand, the unauthorized transactions for FTX.US amounts to $139 million. The following table shows the current financial status of FTX.

![](https://gimg2.gateimg.com/image/article/1680150770471680150230_.pic.jpg)

As you note from the table, there are two categories of digital assets. All the assets in Category A have deficits while those in Category B have surpluses. Category A has major cryptocurrencies which include <a href="/de/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a>, Ether, Sol, <a href="/de/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a>, <a href="/de/price/bnb-bnb" target="_blank" class="blog_inner_link">BNB</a>, Matic, and <a href="/de/price/tron-trx" target="_blank" class="blog_inner_link">TRON</a>, among others.

On the other hand, Category A comprises cryptocurrencies that had low trading volumes such as MAPS, Serum and Fida. Nevertheless, the surpluses for Category B assets do not offset the deficits of Category A ones.

Read also: [FTX Event and Its Domino Effects?](https://www.gate.io/blog_detail/1792/ftx-event-and-its-domino-effects "FTX Event and Its Domino Effects?")

The financial records of FTX.US also show various discrepancies of different magnitudes. Based on the spot prices at the time of the petition, FTX.US has digital assets worth $191 million, $28 million of customer receivables as well as $155 million of other receivables. On the other hand, it has a total of  $107 million net payable to Alameda Research.

The FTX debtors have, however, made it clear that the process of getting the updated financial data had been difficult which might have resulted in minor discrepancies. They reported, “The information in the presentation is preliminary and subject to material change. The analysis is further complicated by the incomplete nature of the books and records and financial information maintained by pre-petition management.”

## When was the FTX and FTX.US deficit revealed?  
The massive deficit for FTX and FTX.US were revealed by the FTX Debtors who investigated the case and filed reports for the FTX Chapter11 Bankruptcy case. In fact, the unearthing of the deficit required great effort and thorough investigation. The missing funds were revealed on 2 March 2023 when the FTX Debtors made their presentations as part of the Chapter11 Bankruptcy procedure.

Nevertheless, it is important to note that the customer’s funds disappeared over a long period. Most likely, part of the funds disappeared before the FTX team filed for Chapter11 Bankruptcy. The much hyped FTX news shows that some of the funds went missing from the time FTX filed for Bankruptcy. That is the reason why some analysts have pointed out that some of the assets lost through hacking after the filing of Bankruptcy were part of an inside job.

## Refunds options
Most FTX customers would like to know if there are going to be any refunds. In November 2022, FTX Japan promised to refund its customers in February 2023. The refund is supposed to be processed through Liquid Japan, a crypto exchange. As a result, FTX Japan requested its customers to open accounts with Liquid Japan. However, the exact date of the refund depends on the outcome of the ongoing auditing process.

It is also possible that some FTX partners would refund their customers affected by the collapse of the crypto exchange. For example, on 11 November last year the Video game retailer GameStop (GME) announced that it was planning to refund its customers.

![](https://gimg2.gateimg.com/image/article/1680150828481680150249_.pic.jpg)
GameStop to refund its customers - Twitter

As you may anticipate, refunds by third parties may involve small sums of funds.

## Conclusion
FTX and FTX.US have large deficits as indicated by the financial records, compiled by the FTX Debtors and presented for the purpose of the FTX Chapter11 Bankruptcy case. Part of this amount was unauthorized withdrawals that took place after FTX had filed for Bankruptcy. Notably, FTX Japan and GameStop (GME) promised to refund its customers.

<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>