More Than a Million Creditors Could Be Affected by FTX Fallout

The FTX logo and mobile app adverts are displayed on screens in London on Nov. 10, 2022. (Leon Neal/Getty Images)

The collapse of the FTX crypto exchange, which was valued at $32 billion at its peak, could end up affecting far more creditors than earlier estimated, according to a recent filing by the company.

In its Chapter 11 bankruptcy filing last week, FTX indicated that it had more than 100,000 creditors with claims in the case. In its updated filing on Tuesday, the company cited new estimates. “As set forth in the Debtors’ petitions, there are over 100,000 creditors in these Chapter 11 cases. In fact, there could be more than 1 million creditors in these Chapter 11 cases,” the updated court filing says.

Usually in such cases, debtors are required to provide a list with names and addresses of their top 20 unsecured creditors. But given the large scale of FTX debts, the firm intends to provide a list of the top 50 creditors by Friday.

FTX filed for bankruptcy on Nov. 11 after a report by CoinDesk revealed that the balance sheet of its affiliate trading firm, Alameda Research, was made up largely of the FTT token which is issued by the exchange itself.

As concerns about FTX’s balance sheet grew, depositors began to withdraw funds en masse, causing the FTT token to plunge in value. FTX had approached crypto exchange Binance for a deal.

But the deal never materialized as Binance was concerned about possible mishandling of customer funds at FTX as well as investigations by the U.S. government.

During the weekend, FTX was also hit by a hacking attack, which resulted in a theft of $400 million worth of tokens. “FTX faced a severe liquidity crisis that necessitated the filing of these cases on an emergency basis last Friday,” the latest filing said.

Crypto Fallout

Many entities are expected to be severely affected by the FTX collapse. Travis Kling, head of crypto hedge fund Ikigai, revealed to the UK Treasury Select Committee that they maintained a “large majority” of the hedge fund’s assets on FTX, according to The Guardian. By the time the firm began withdrawing money on Monday, they could not secure much.

According to Tim Grant, head of Europe, the Middle East, and Africa at the crypto investors Galaxy Digital, they have lost $77 million due to the crisis.

“Primarily, the users were institutional. And also the equity investors were among the most sophisticated and largest investors in the world,” he said. “So there were a lot of very experienced eyes on this, and what it tells us is that this was a bad actor who was doing things behind very closed doors that we had no view into as a broader group.”

Other firms and institutions lost also. On Nov. 9, for example, venture capital firm Sequoia Capital announced that it was marking down its investment in FTX to zero. The firm lost $150 million.

The Ontario Teachers’ Pension Plan (OTPP) had invested $95 million into FTX. Investment firm Temasek, owned by the Singapore government, had bet $205 million on the company.