• FTX attorneys tell the bankruptcy court that the exchange has recovered more than $5 billion worth of liquid assets. 
• The exchange plans to sell $4.6 billion in assets to repay customers, a move that could crash crypto prices. 

Customers of the bankrupt cryptocurrency exchange FTX may soon recover part of their losses. Adam Landis, a bankruptcy attorney for FTX, revealed during a hearing that the exchange has recovered more than $5 billion in different assets.

According to a CNBC report, the attorney notes that this amount does not include the $425 million in crypto held by the Securities Commission of the Bahamas. It also excludes the value of FTX’s holdings of illiquid cryptocurrency tokens.

This is because the exchange’s positions in the tokens are “so large relative to the total supply.” The sale of these tokens by FTX would significantly affect their markets, the Landis Rath & Cobb partner explained.

Attorney Landis, meanwhile, notes that what FTX did with the missing funds is clear. It has been established that FTX CEO Sam Bankman-Fried (also SBF) instructed Gary Wang to create a “backdoor” for Alameda to borrow from FTX without permission.

Alameda in turn used the borrowed customer funds to buy planes, houses, host parties, and make political donations. Alameda also made personal loans to its founders and sponsored several FTX marketing initiatives including the FTX Arena in Miami, and a Formula One team.

Will FTX recovered assets cause a crypto market dump?

FTX is planning to unload parts of the recovered liquid assets that are non-strategic investments to repay part of missing customer assets according to a New York Post report. Andy Dietderich, an attorney for the exchange, told US bankruptcy judge John Dorsey in Delaware that these assets have a book value of $4.6 billion.

He added that the liquidation will proceed when the exchange accurately determines the total amount it owes its creditors. It is still working on creating accurate internal records, leaving the actual customer shortfall unknown.

Similarly, the court has set a March 15 deadline for the completion of this work. Current estimates made by FTX attorney, Brian Glueckstein of Sullivan & Cromwell, put the figure at around $10 billion owed to as many as 9 million creditors.

Another issue that came up during the hearing was how to coordinate the compensation of customers. Landis spoke about FTX’s recently announced cooperation agreement with the Securities Commission of the Bahamas.

It does not matter who collects $1 for customers, as long as the customers get it. We’ve established a task force with the official committee of creditors and the Bahamas JPL to explore alternatives for the sale or reorganization of the international platform,

This recovery effort which is a welcome boon for FTX customers is however likely to cause some massive crypto market volatility. Conor Grogan, a director at crypto exchange Coinbase, predicts that several tokens will likely take a hit from the move. These include SOL, MAPS, OXY, WBTC, BONA, and SPL.