Two days ago, the bankruptcy trustee and FTX debtors announced an update for unsecured creditors claiming discovery of $5.5 billion in liquid assets. Of these funds, roughly $3.5 billion are cryptocurrency assets, with 11 digital currencies classified as “liquid assets.” However, two of the company’s top cryptocurrency caches are not liquid, as the company’s 4751,000,000 SOL tokens are locked and the company’s FTT balance distorts the actual liquidity realization as the FTX controls over 80% of supply.
Locked Solana and illiquid FTT assets complicate FTX’s bankruptcy process
On January 17, 2023, the FTX debtors issued a press release and visual presentation of assets discovered since the company filed for Chapter 11 bankruptcy protection on November 11, 2022 The FTX debtors claimed to have discovered $5.5 billion through “painstaking research efforts” and $3.5 billion reportedly in crypto assets. The visual presentation explains that FTX controls about $685 million inSolana (SOL)tokens, about 47,511,173 SOL, and using today’s SOL exchange rates, that cash is worth much more than $685 million Is.
However, the SOL owned by the FTX debtor is locked up and this is not mentioned in the visual presentation shown to unsecured creditors FTX/Alameda was able to purchase 16% of the SOL supply from the Solana Foundation reportedly with a lock-up schedule. The 4.751 million SOLs currently in storage represent 8.82% of the total supply that the Solana network will eventually issue. The 370,992,365 SOLs currently in circulation do not include the 4.751 million locked SOLs owned by the liquidators.
The problem with calling this SOL cash liquid is that it could take years before it is locked and subject to a linear vesting from 2025 to 2027 and access to funds. Additionally, the debtor’s cache, theftx token (FTT), a coin originally created by Core Coins, Inc. was originally created by the core team of FTX, but since FTX controls over 80% of the total supply, it too is illiquid. For example, Ethereum (ETH) address “0x97f” controls 45,850,883.” It controls 45,850,883 FTTs, worth over $1.8 billion using today’s exchange rate; the FTX debtor presentation states that the FTT is worth $529 million worth of FTT tokens.
The locked Solana issue and the fact that FTX owns most of the FTTs in circulation puts these tokens on the more illiquidside. This can complicate bankruptcy proceedings and payments to creditors because it is difficult to convert these assets into cash or other crypto.