FTX's bankruptcy team is struggling to track down all of the cryptocurrency exchange's assets after it collapsed and filed for Chapter 11 on Nov. 11. In a bankruptcy court hearing Tuesday, a FTX lawyer said a substantial amount of assets are either missing or stolen, the Wall Street Journal reported.
The company's new management is trying to chase down and retrieve at least some of the billions of dollars that passed through FTX and sister trading firm Alameda Research.
Inexperienced, Unsophisticated, Compromised
"What we have here is a worldwide, international organization, but which was run as a personal fiefdom of (company co-founder and former CEO) Sam Bankman-Fried," FTX counsel James Bromley said in a Delaware bankruptcy court on Tuesday. "FTX was in the control of inexperienced and unsophisticated individuals, and some or all of them were compromised."
Bromley described the fall of FTX as "one of the most abrupt and difficult collapses in the history of corporate America and the history of corporate entities around the world. "
FTX drew in millions of individual and institutional customers. Lawyers are unsure whether the recoverable assets will be enough meet obligations. Court papers show the 50 largest creditors are owed more than $3 billion. FTX's team said it will need months to sort through customer claims and Alameda's risky trades. Meanwhile, customer funds on the exchange remain frozen.
And in a further testament to SBF's mismanagement, court papers last week revealed one of FTX's units spent $300 million in company funds on houses in the Bahamas for the previous senior staff members and Bankman-Fried's parents.
Now, newly-appointed CEO John J. Ray III, who oversaw Enron's bankruptcy liquidation, is tasked with salvaging what funds he can for investors and customers. It could be his toughest test yet. "Never in my career have I seen such a complete failure of corporate controls and such a complete absences of trustworthy financial information," he previously said.
Beyond FTX: Battle Testing Bitcoin
But while Bankman-Fried appears to have flown too close to the sun, Cathie Wood still believes Bitcoin is going to the moon.
Wood, founder and CEO of ARK Investment Management, maintains her Bitcoin price target of $1 million per coin by 2030, she told Bloomberg Businessweek Tuesday evening. Even as the world's largest crypto hit two-year lows on Monday.
"Sometimes you need to battle-test. You need to go through crises to see the survivors, to test the infrastructure and thesis. We think Bitcoin is coming out of this smelling like a rose," Wood said.
"If you look at the blockchain … the infrastructure, the technology has not skipped a beat throughout this entire crisis," she said. Wood points to Bitcoin's hash rate, at an all-time high, as a testament to security. And Ethereum's total value staked is at an all-time high of $24 billion.
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Ark Invests
Wood's putting her money where her mouth is, snapping up battered shares of Coinbase stock and Grayscale Bitcoin Trust.
The Ark Next Generation Internet ETF and ARK Innovation ETF funds, combined, purchased nearly 177,000 shares in GBTC worth $1.5 million on Monday. That's after ARKW bought more than 315,000 shares of GBTC worth about $2.8 million, last Monday, Bloomberg reported.
Since Nov. 9, the two funds have purchased about 1.3 million COIN shares, worth $56 million based on Tuesday's closing price, bringing its total holdings to 8.37 million shares.
"I think Coinbase is going to come out of this very strong, it just lost a very big competitor in FTX," Wood said in the Bloomberg interview.
Coinbase's current share prices are down likely lower because of fear and lack of crypto understanding, she said. Still, crypto is unlikely to face a "Lehman moment," because the scale is much smaller. And while the FTX situation "was fraud," Wood projected that the claims will eventually be much less than those from Bernie Madoff's scandal.
Meanwhile, decentralized finance platforms, which use secure, distributed ledgers similar to cryptocurrencies, are set to take off because of its increase in transparency and lower counterparty risk, Wood says.
COIN and GBTC now make up ARK's 14th and 41st largest holdings, across all of its funds, according to the firm's latest data.
Bitcoin rose above $16,500 Wednesday afternoon. COIN stock rose 5% another by market close after jumping 5.2% on Tuesday. And GBTC stock leapt 9.3% after gaining 2% Tuesday.
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