$740 million in crypto assets recovered so far in FTX bankruptcy

NEW YORK — The company tasked with locking up the assets of failed cryptocurrency exchange FTX says it has been able to recover and secure $740 million in assets so far, a fraction of the potentially billions of dollars likely missing from the company’s coffers.

The numbers were disclosed Wednesday in court filings by FTX, which hired cryptocurrency custody company BitGo hours after FTX filed for bankruptcy on November 11.

The biggest worry for many FTX customers is that they will never see their money again. FTX failed because its founder and former CEO Sam Bankman-Fried and his aides used client assets to make bets on FTX’s closely related trading firm, Alameda Research. Bankman-Fried reportedly sought more than $8 billion from new investors to repair the company’s balance sheet.

Bankman-Fried “proved that there is no such thing as a ‘safe’ conflict of interest,” BitGo CEO Mike Belshi said in an email.

The $740 million figure is from November 16. BitGo estimates that the amount of recovered and secured assets has likely grown to over $1 billion since that date.

BitGo’s recovered assets are now locked away in South Dakota in what is known as “cold storage,” meaning they are cryptocurrencies stored on hard drives that are not connected to the Internet. BitGo provides what are known as “qualified custodian” services under South Dakota law. It is essentially the crypto equivalent of a financial fiduciary, offering segregated accounts and other security services to lock digital assets.

Several crypto companies have failed this year such as bitcoin and other digital currencies crashed in value. FTX failed when it suffered the crypto equivalent of a bank run, and early investigations found that FTX employees were mixing assets held for clients with assets they were investing.

“Trade, financing and custody should be different,” Belsche said.

Recovered assets include more than just bitcoins
BTC USD,
+1.01%

and ethereum
ETH USD,
+2.70%
,
but also a collection of secondary cryptocurrencies that vary in popularity and value, such as the shiba inu coin
SHIBUSD,
1.00
.

California-based BitGo has a history of recovering and securing assets. The company was tasked with securing assets after cryptocurrency exchange Mt. Gox failed in 2014. It is also the custodian of assets held by the government of El Salvador as part of that country experiment with using bitcoin as legal tender.

FTX pays Bitgo $5 million in salary and $100,000 per month for its services.

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