Sam Bankman-Fried claims that FTX US is solvent despite demands from debtors

Sam Bankman-Fried claims that FTX US is solvent despite demands from debtors

Former FTX CEO Sam Bankman-Fried has reiterated the claim that FTX US is solvent after recent statements from FTX debtors claimed the opposite.

According to Bankman-Fried, the group failed to account for customers' bank balances, causing the US company's assets to significantly exceed its liabilities to customers.

Clearing the Air on FTX US

In oneSubstack postOn Wednesday, Bankman-Fried said that certain statements made by Sullivan and Cromwell (S&C; one of the law firms that managed FTX's bankruptcy) on Tuesday were "extremely misleading" as they related to FTX US's solvency.

At the time, the law firm explained that the assets it was able to identify as belonging to the exchange were “significantly lower than the aggregate third-party customer balances suggested by the electronic ledger for FTX US.” In a separate presentation, the company also claimed that there are significant asset shortages at both FTX International and FTX US.

“These claims by S&C are false and refuted by data later in the same document,” Bankman-Fried said. “FTX US was and remains solvent, likely with hundreds of millions of dollars exceeding customer balances.”

Bankman-Fried recounted thisthe same storyabout the US exchange both before and after FTX Group's bankruptcy filing in November, as the assets of both exchanges were separated. Likewise, John J. Ray III – the new head of FTX, who is overseeing the bankruptcy –toldCongress last month that FTX US's assets were separate from those of Alameda Research, with which FTX International had pooled its resources.

In fact, Bankman-Fried claimed that FTX US has a positive balance sheet in the region of $400 million in excess cash. He arrives at this figure by including the $428 million in FTX US bank accounts as an asset - which Cromwell claims he did not do.

The numbers

Notably, the law firm reported $497 million in customer balances, which exceeded the $181 million in digital assets that FTX US identified in connection with the exchange. Therefore, Cromwell concluded that FTX had a large asset gap. However, when the exchange's bank account balance is included, this deficit becomes a surplus.

Additionally, Bankman-Fried denied that the $497 million customer balance figure was outdated and recorded before FTX US experienced massive withdrawals. In reality, he estimated the figure to be about $199 million.

Bankman-Fried compared $609 million in cash and digital assets with a customer balance of $199 million and concluded that FTX US had “at least $111 million and probably around $400 million” in excess cash prior to bankruptcy.

“FTX US is solvent,” he said. “Customers should have access to their funds.”

Of the $181 million in digital assets identified as being tied to FTX US, $90 million isbeen lostsaid the debtors of the stock exchange on Tuesday.

Bankman-Fried haspleaded not guiltyCharges of wire fraud, money laundering conspiracy and other allegations suggesting he defrauded investors. In contrast, former Alameda Research CEO Caroline Ellison and Bankman-Fried's former right-hand man Gary Wang have done sopleaded guiltyat similar fees.

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