FTX CEO John Ray III plans to attempt to sell or reorganize its businesses after a review found many of its subsidiaries have “solvent balance sheets”

Many of collapsed crypto group's subsidiaries have ‘solvent balance sheets’, John Ray III says

Financial Times 2022-11-20

Context & Ripple Effects

FTX’s bankruptcy began with an effort to untangle an extremely complex corporate structure, while Ray replaced directors and engaged with dozens of regulators. His subsequent description of a complete failure of corporate controls made reliable entity-level records central to any recovery plan.

The finding that some subsidiaries have solvent balance sheets shifts the process from simply containing a collapsed group toward identifying businesses that may be preserved, sold, or reorganized separately.

First-order effects

John Ray III can assess individual FTX subsidiaries for sale or reorganization rather than treating every business as a liquidation candidate.
FTX’s new management must separate viable subsidiaries from the group’s weak records and governance failures before presenting them to buyers or restructuring them.

Second-order effects

Potential buyers and FTX creditors gain a clearer route to value from operating units, but the documented control failures raise the diligence burden around each subsidiary’s assets and obligations.
The entity-by-entity review makes the earlier corporate-structure work more consequential: recoveries depend on whether FTX can establish which businesses and balances stand apart from the parent group.

Third-order effects

If FTX can preserve solvent units through sales or reorganization, its bankruptcy will reinforce that crypto-group failures are resolved through subsidiary-level restructuring, not only a single estate-wide wind-down.
The case also makes corporate records and controls a practical determinant of restructuring costs and creditor outcomes, rather than a governance issue addressed only after a collapse.

The trend: FTX’s case is moving from emergency governance replacement toward an entity-by-entity restructuring of businesses that may retain standalone value.

Discussion

@tiffanyfong_ Tiffany Fong on x
On our phone call, @SBF_FTX said his lawyer “chewed him the fuck out” for his apologetic tweets & told him to “promise that you never ever say you fucked up again”. Sam allegedly told his lawyer to “go fuck himself”. (SBF phone call 11/16) https://twitter.com/...
@ftx_official @ftx_official on x
1/ Sharing a Press Release issued early today - FTX launches strategic review of its global assets. Text below (and link). https://www.prnewswire.com/...
@altcoinpsycho @altcoinpsycho on x
Why did @SBF_FTX just like this tweet 🫠 https://twitter.com/...
@timsweeneyepic Possibly Tim Sweeney on x
The crypto collapse gels a thought I've had for a long time: Silicon Valley VCs erred by shifting investment away from nerd technologists to highly articulate hucksters. The last decade didn't build solid companies, it made Crypto Boy Bands.
@dystopiabreaker @dystopiabreaker on x
the thing that upsets me the most about ftx is that mainstream seems to think some random guy's hedge fund blowing up invalidates all the amazing zk, pl theory, cryptography, mechanism design, distsys work that so many amazing high-integrity people are working on
@adamscochran Adam Cochran on x
1/10 There is still potentially millions or even hundreds of millions in tokenized stock assets, missing from the FTX/Alameda balance sheets, and no one can find it. 1. They had a deal with CM-Equity to allow trading of tokenized stock.
@lizrhoffman Liz Hoffman on x
Perella Weinberg gets the job of figuring out exactly what on earth FTX owns https://www.prnewswire.com/...
@__justplaying Alice on x
ok now that we had the apocalypse yesterday time to go back to the FTX discourse https://twitter.com/...
@adamscochran Adam Cochran on x
2/10 2. SBF had bragged about using that for Alameda to take positions. 3. They took trading fees on those stocks, in the stock, meaning they had to have balances. 4. Users had balances in that stock at time of shutdown.
@dylanleclair_ Dylan LeClair on x
Why couldn't multi-billion dollar firm @chainalysis identify that FTX user deposits were being commingled with Alameda trading wallets while randoms on Twitter could? What exactly is the point of your service again? https://twitter.com/...
@renato_mariotti Renato Mariotti on x
Telling your lawyer to “go fuck himself” because lawyers don't “know what they're talking about” might just be the worst response to a federal criminal investigation that I've ever seen. @SBF_FTX is attacking the one person who is fighting hard to keep him out of prison. https://…
@riddle245 @riddle245 on x
Funny how the Enron liquidator was like worst shit I have seen but then trying to put on a strong face with “Solvent balance sheets”. Either way getting ready to review the potential sales. Not sure how much in assets now. Surprised FTX had 110 affiliated cos https://twitter.com/…
@tree_of_alpha @tree_of_alpha on x
[Court Filing] As of Nov 16, FTX identified 216 Debtor Bank accounts with positive balances at 36 banks worldwide. FTX does not yet know the total amount of cash they hold because of historical cash management failures. How much are y'all expecting to get on the dollar? 5c?
@followtheh Tom Hearden on x
Grab an umbrella, it's about to rain shitcoins https://twitter.com/...
@adamscochran Adam Cochran on x
10/10 Both are massive risks, and huge exposure for the US market, and something that US regulators will likely fight the Bahamas on. Right now, it seems these stock holdings aren't being counted for anyone.
@lisabraganca @lisabraganca on x
Great take by @retheauditors on what investors and accountants missed in FTX's audits - Short answer is multiple red flags. https://www.coindesk.com/... via @coindesk
@silvermanjacob Jacob Silverman on x
Has anyone checked under the bean bag chairs in the $40m penthouse for the missing money https://twitter.com/...
@adamscochran Adam Cochran on x
9/10 This means either: A) They were also lying about the sale of stocks, including US stocks, to their users. or B) There are potentially hundreds of millions of dollars in stocks hidden out there.
@zachdex Zach Dexter on x
FTX has engaged Perella Weinberg to explore spinning out LedgerX + others. “Based on our review [..], we are pleased to learn that many regulated or licensed subsidiaries [..] have solvent balance sheets, responsible management and valuable franchises” https://www.prnewswire.com/…
@olafstorbeck Olaf Storbeck on x
I have long been convinced that crypto is basically one massive fraud. But the stuff at FTX still exceeds my worst expectations. And this was a company that was regarded as one of the more serious players. So what about the others? 😬😬😬 https://enterprise-sharing.ft.com/ ...
@zerohedge @zerohedge on x
“Based on our review over the past week, we are pleased to learn that many regulated or licensed subsidiaries of FTX, within and outside of the US, have solvent balance sheets, responsible management and valuable franchises” - John J. Ray
@kenziesigalos MacKenzie Sigalos on x
New FTX updates this am: - 99 pages worth of filings added to FTX court docket today - FTX plans to sell or restructure - But in NY, Bahamas regulators still pushing for control, after seizing some of FTX's assets over the weekend More: https://www.cnbc.com/... w/@moleskinemaniac
@autismcapital @autismcapital on x
Sam has removed the bio description from his profile. https://twitter.com/...
@denniskelleher Dennis Kelleher on x
BTW, while @CFTC says this shows they did a good job & nothing else they could do, @FTX_Official @SBF_FTX's finances/financial resources were critical to its application to dangerously change clearing house rules & #CFTC should have been investigating/demanding information 1/3 ht…
@mattgoldstein26 Matthew Goldstein on x
Based on the press release just on potentially viable assets and operations this indicates that maybe regulation and better controls makes a difference? https://twitter.com/...
@alistairmilne Alistair Milne on x
Everyone's talking about ‘regulatory clampdown’ in the wake of FTX ... ... but I'm fairly sure that regulations/laws against theft, ponzis, fraud, etc. already exist globally
@pengcapital Kevin Peng on x
1) Where does Solana go from here? More than any other L1 ecosystem, the Solana ecosystem has been impacted massively by the FTX and Alameda collapse. Let's take a look at the data from the fallout of one of the biggest disasters in crypto history
@ercwl Bearica Wall on x
i wake up each morning and i can't get over the fact that that ftx raised $2b from sequoia, temasek, paradigm on the virtue of being “regulated”, “trusted” and richard heart raised $2b from trailer park ppl using MLM tactics and ftx still turned out to be the bigger scam what
@zenofdesign Damion Schubert on x
Just a reminder that most web3/blockchain/crypto stuff is absolutely 100% a scam. FTX just made the mistake of being too ambitious and getting caught. https://twitter.com/...
@emilyjnicolle Emily Nicolle on x
new: FTX is reviewing the group's assets to prepare them for sale, new CEO John J. Ray said today. a filing in Delaware showed FTX EU has the biggest cash pile identified so far, while FTX Ventures — which launched a $2bn fund in January — has >$800k https://www.bloomberg.com/...
@emilydparker Emily Parker on x
“The fact that Bankman-Fried repeatedly took to Twitter to reassure his exchange's users that everything was fine before the various stages of its fall could make any case against him easier” Good read by ⁦@nikhileshde⁩ https://www.coindesk.com/...

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