The FTX Balance Sheet
Liquidity matters when trust evaporates. What's behind FTX's bubbly balance sheet 👀
A few notes on the FTX balance sheet revealed on Thursday, November 10 (as per Financial Times)
👉a $10bn asset business is run on an xls spreadsheet 🤯
👉A footnote pointing to $8bn of “hidden, poorly internally labelled fiat accounts” gives a perspective on the magnitude of the incompetence at play 🤬
👉At the date of the report, asset value exceeded liabilities by $722m. However, liquid assets were clearly insufficient to cover withdrawals, triggering bank run that resulted in FTX filing for Chapter 11.
👉Overall, liquid assets cover only 10% of liabilities. Recovery ratio are anybody’s guess on less liquid assets, potentially leading to a recovery up to 50% max. Creditors and depositors are left holding the bag for a total loss of up to $8bn.
👉Among creditors, Genesis and BlockFi are owed $200m and $215m respectively. More to follow for these two I guess 👀
👉FTX owns a 7.6% stake in Robinhood, representing > 50% of its assets. The likely liquidation is weighting down on HOOD share price. FTX VC investors would have been better off buying HOOD directly.
👉90% of FTX assets are either “less-liquid” tokens, or “illiquid” participations. The 65% collapse in less-liquid token assets over a week triggered a bank run on FTX.
👉FTX had in fact leveraged its proprietary FTT token, which lost 90% of its value in a few days.
👉Serum (SRM), and Solana (SOL) tokens are the next big exposures on FTX balance sheet. Although the SRM valuation doesn’t make much sense [TBC]
👉“other ventures” represent a massive $1.5bn, or 15% of total assets. This underlines the influence of FTX in the crypto VC space. Its absence will be felt dearly. The seeded projects can forget about capital calls.
👉 Worth mentioning that FTX, which raised at $32bn valuation in Jan22, is now worth 0 (actually negative). VC investors who participated, such as Sequoia, Ontario Teachers Fund, Softbank, Paradigm…etc, have now written off their investment.
The magnitude of such a whole in the balance sheet is still being explained. Fair to state though that FTX was run more like a bank, and not an exchange. It now appears clearly that they were leveraging creditors’ money to invest in all sorts of participations. A lack of oversight is partially to blame for the mishaps.
As soon as it was uncovered publicly, thanks to Binance’s CZ, a rush for the exit ensued. This is a classic bank run. Another reminder that TRUST is actually of prime importance, and proof of trust are even more essential.
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👉 FTX balance sheet revealed https://www.ft.com/content/0c2a55b6-d34c-4685-8a8d-3c9628f1f185