FTX top creditors likely include a series of hedge funds
As one of the easiest exchanges to trade on, many of the largest creditors to the FTX exchange were professional hedge funds, many of which are now completely underwater.
According to the court filing on Saturday, the top 10 largest creditors are collectively owed $1.45 billion, but the court filing did not explain who the creditors were.
It is already known that some hedge funds, such as Ikigai, held a large portion of their funds on the exchange, which they have been public about.
It is also known that the contagion has caused other companies to restrict withdrawals “temporarily”, such as Genesis, a company operated by DCG.
Venture capital firm Sequoia has also written off the entirety of their $210 million investment into FTX, being forced to mark it down to zero.
Sam Bankman-Fried of FTX owes its 50 biggest unsecured creditors a total of $3.1 billion, per Bloomberg.
— unusual_whales (@unusual_whales) November 20, 2022
Millions of users are owed billions more
Those who weren’t large hedge funds but retail investors number in the millions, and have collectively lost many billions more.
As the largest centralised exchange to ever completely fail, the FTX debacle will have left many investors and speculators reeling in horror, and has permanently damaged their perception of trust in the crypto industry.
John Ray III, who was the bankruptcy specialist in charge of overseeing the Enron collapse, has made it clear that he has “never seen such corporate mismanagement” as what has been happening at FTX, with executives of the company freely allowing funds to spent without checks and balances – top executives used client funds to purchase homes and give themselves massive loans.
Users are unlikely to see their funds back
Given that those who use centralised exchanges are most often legally recognised as unsecured creditors, it is highly unlikely that they will ever see their funds returned to them.
The bankruptcy proceedings are now underway and there appears to be no feasible way for the company to make repayments.
As was the case with Mt. Gox, and now with other firms such as Celsius, it appears as though the process will likely be drawn out for years, with the entire industry being forced to take a massive hit.
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