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The recent FTX collapse has prompted many crypto exchanges and investment platforms to share “Proof of Reserves” – a public-facing attestation as to a c custodial service’s reserves alongside a record of its liabilities (i.e., user balances).
However, crypto investment firm Grayscale, the bitcoin trust for wealthy investors with a minimum buy-in of $500,000, recently tweeted that it won’t show proof of reserves due to “security concerns.”
Grayscale’s tweet reads:
“Due to security concerns, we do not make such on-chain wallet information and confirmation information publicly available through a cryptographic Proof-of-Reserve, or other advanced cryptographic accounting procedure. We know the preceding point, in particular, will be a disappointment to some, but panic sparked by others is not a good enough reason to circumvent complex security arrangements that have kept our investors’ assets safe for years.”
Grayscale Bitcoin Trust (GBTC) hit a record low on Thursday, as did its ETHE product.
The firm’s parent company, Digital Currency Group, has brushed off contagion fears after the shocking collapse of FTX.
At the same time, however, another entity affiliated with Grayscale recently halted withdrawals. Genesis Global Capital is linked to Grayscale through Digital Currency Group.
FTX Says Top 50 Creditors Are Owed $3.1 Billion
According to a recently filed court document, FTX owes its 50 largest creditors about $3.1 billion with claims ranging from tens of millions to hundreds of millions of dollars.
The document also reveals that FTX has around 1 million creditors, with the largest single claim standing at $226 million and the second largest one at $203 million.
The document further reads,
“The Top 50 list is based on the Debtors’ currently available creditor information, including customer information that was able to be viewed but is not otherwise accessible at this time. The Debtors’ investigation continues regarding the amounts listed, including payments that may have been made but are not yet reflected on the Debtors’ books and records. The Debtors are also working to obtain full access to customer data.”
On Saturday, a statement from John J. Ray – the company’s new CEO – struck a slightly more optimistic tone about the possibility of recovering assets to repay those creditors.
On Thursday, the veteran bankruptcy executive said he’d never seen anything as bad as FTX in 40 years in the restructuring business. He was also famously responsible for restructuring Enron after it went insolvent in 2001.
“We are pleased to learn that many regulated or licensed subsidiaries of FTX, within and outside of the United States, have solvent balance sheets, responsible management, and valuable franchises,” said Mr. Ray, who was hired to oversee the company during its bankruptcy princess, on Saturday.
FTX’s new management hired an investment bank to help sell viable parts of its business and discovered there were more than 200 accounts containing positive cash balances. A separate filing in federal bankruptcy court identified 216 bank accounts with positive balances, offering the possibility that there was some value left in FTX’s wreckage for creditors to recover. It verified account balances worth about $564 million, according to the filing.
Much of that money, however, is either held in outside entities that directly filed for bankruptcy protection or is considered restricted cash, meaning others may lay claim to it.
FTX said it doesn’t yet know the total amount of cash that the crypto exchange or its related entities hold because of “historical cash management failures and the deficiency of documentation controls,” one of the Saturday filings to bankruptcy court said.
As of Nov. 16, the filing said, the company had been able to verify the balances in only some of the bank accounts held at 36 banks worldwide.
FTX said the company was in the process of locating additional bank accounts by “reviewing the available books and records, speaking with bank personnel and interviews with employees.”
The filing said that entities including FTX EU Ltd. and West Realm Shires Services Inc. – which includes the business known as FTX US – have some of the largest verified account balances so far.
To date, FTX’s new management team has verified $49.3 million of total cash for FTX EU and $48.1 million for West Realm Shires Services.
The efforts by FTX’s new management to track down assets has been further complicated in recent days by a dispute with securities regulators in the Bahamas for control of FTX’s insolvency proceedings.
Last week, FTX said in court papers, citing purported texts by Sam Bankman-Fried, that it appears regulators in the Bahamas instructed him to9 transfer assets from the exchange to a digital platform controlled by local government officials. The Securities Commission of the Bahamas, the lead local authority investigating FTX’s collapse, said last week that it directed the transfer of all digital assets of FTX’s Bahamas subsidiary, FTX Digital Markets LTD., “to a digital wallet controlled by the Commission, for safekeeping.”
The movement of hundreds of millions of dollars from FTX accounts in the early hours after the exchange filed bankruptcy sparked fears of a hack.
It’s still unclear if and how much of the funds moved went to Bahamian custody or were taken by an unauthorized actor.
FTX’s new management team on Sunday warned other cryptocurrency exchanges to be vigilant for stolen funds from its platform that might cross their paths. Exchanges are often the place where hackers attempt to swap cryptocurrencies for government-issued cash.
“Exchanges should take all measures to secure these funds to be returned to the bankruptcy estate,” FTX said in a tweet.
In other court filings over the weekend, FTX also sought approval from the court for a new cash-management system to manage FTX’s remaining money and to allow payment of critical vendors and vendors at foreign subsidiaries.
FTX said that without the authority to pay critical vendors, FTX could face “irreparable security risks, potential data loss or other disruptions and ultimately loss of value to their estates.”
Court Sets Jan. 3 Deadline for Celsius Customers To File Claims In Bankruptcy Case
The U.S. Bankruptcy Court of the Southern District of New York has set January 3rd, 2023 as the deadline for Celsius customers to file a claim in the company’s bankruptcy case.
The court stated that any person or entity is free to file a claim via mail, by hand or through the website of Celsius’ claims agent ‘Stretto’.
“Customers should expect to receive a notice regarding the bar date and next steps in the proofs of claim process from our claims agent, Stretto, via email, physical mail for those customers with an address on file, and through a notification in the Celsius app,” Celsius said Sunday on Twitter.
However, no action is required for customers who agree with Celsius’s scheduling of their claims. The next Celsius hearing is set for Dec. 5, where the firm says it plans to discuss custody and withhold accounts.
Celsius filed for bankruptcy protection in July, after a crypto market slide in the spring landed the firm in trouble. At its peak, Celsius managed more than $10 billion in assets and claimed it had more than 1.7 million users.
Billionaire Investor Bill Ackman Endorses Crypto Project Helium, Discloses Crypto Holdings
Billionaire investor and hedge fund manager Bill Ackman recently posted a tweet stating that he is bullish on cryptocurrency, despite the collapse of FTX.
His tweet particularly highlighted the decentralized hotspot network Helium as an example of a real-world use case for cryptocurrencies.
The tweets read,
“I was initially a crypto sceptic, but after studying some of the more interesting crypto projects, I have come to believe that crypto can enable the formation of useful businesses and technologies that heretofore could not be created. Despite crypto’s ability to facilitate fraud, with the benefit of sensible regulation and oversight, crypto technology’s potential for beneficent societal impact may eventually compare with the impact of the telephone and internet on the economy and society.”
After examining a number of “interesting crypto projects,” Ackman said that he began to “understand how a token could build intrinsic value over time” and evolve past the speculative nature of a modern-day “tulip mania.”
“Over time, a two-sided market for HNT [Helium’s token] develops in which miners buy hotspots and deploy them around the globe to earn tokens. Users, in turn, purchase GNT tokens in order to use the network. The more demand for the network, the more demand for HNT,” Ackman tweeted.
HNT is down nearly 95% during the last year, according to CoinGecko data. The token now trades for $2.23.
Aside from endorsing Helium, Ackman said he owns a stake in ORIGYN Foundation, a relatively unknown project that makes vague references to non-fungible tokens (NFT) on its site and says it “unites industry leaders from art, luxury, media, entertainment, sports, and more with token holders.”
He also said he has a position in Goldfinch Finance, a lending platform that says it pays 17% on USDC deposits, with nearly $100 million in active loan value despite only $100,000 in protocol revenue.
“Goldfinch yields come from real-world lending, and investments are collateralized off-chain, which makes them distinctly different from the highly volatile [decentralized finance] lending you might be familiar with,” the site reads.
Its token is now trading for $0.63, down from an all-time high of $32, according to CoinGecko data.