FTX Confirms Loss of $8.9B in Customer Funds

Cryptocurrency exchange FTX has confirmed that $8.9 billion in customer funds are missing, according to a recent report by the Wall Street Journal. This is the first time the exchange has revealed the extent of the fund deficiency, which has been unaccounted for since the exchange collapsed four months ago.


Alameda Research’s Involvement

FTX has reportedly pinned down around $2.7 billion in customer assets, relative to $11.6 billion of the balance outstanding on customer accounts. The estimated value of FTX’s assets and liabilities is based on asset prices in November 2022, when the firm filed for bankruptcy.

It was revealed that Alameda Research had borrowed around $9.3 billion from customer accounts before bankruptcy. Thus, the current $8.9 billion hole can be attributed to Alameda Research. FTX did not clarify if the funds were borrowed with or without customer consent.


Incomplete Records, Ongoing Investigations

According to a financial update filed, FTX’s sister company only had around $475 million in cash in its accounts as of Jan. 31. FTX’s Chief Executive Officer and Chief Restructuring Officer, John J. Ray III, commented that “[FTX’s] 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.”

It is still unclear how much compensation affected customers would receive, even though the exchange has tracked down $2.7 billion. However, around $1.5 billion of that amount includes illiquid crypto assets like FTX’s token, FTT.

The collapse of FTX has prompted fresh warnings about the dangers of cryptocurrency. Global bodies including the Financial Stability Board, the International Monetary Fund and the Financial Action Task Force have repeatedly cautioned banks against inviting the risks that cryptoassets can pose to the traditional financial system.