• FTX debtors recently claimed to have discovered $5.5 billion in liquid assets.
• Roughly $3.5 billion of these funds are crypto assets, with 11 different digital currencies classified as „liquid assets“.
• However, two of the firm’s top cryptocurrency caches are not liquid as the company’s 47.51 million SOL tokens are locked and the firm’s FTT balance distorts the realization of actual liquidity due to FTX’s control of more than 80% of the supply.
On Jan. 17, 2023, FTX debtors released an update for unsecured creditors claiming the discovery of $5.5 billion in liquid assets. Of these funds, roughly $3.5 billion are crypto assets, with 11 different digital currencies classified as „liquid assets“. The visual presentation included in the update explains that FTX controls around $685 million in solana (SOL) tokens, approximately 47,511,173 SOL, and using today’s SOL exchange rate, that cache is worth much more than $685 million.
However, this claim of liquidity is somewhat misleading. FTX’s 47.51 million SOL tokens are locked and the firm’s FTT balance distorts the realization of actual liquidity due to FTX’s control of more than 80% of the supply. This is because the current stash of 47.51 million SOL equates to 8.82% of the total supply the Solana network will eventually issue over time. Presently, there is only 370,992,365 SOL in circulation and that does not constitute a liquid asset.
The same is true for FTT, the native token of FTX’s decentralized derivatives exchange, Serum. FTX has a large hold on the supply of FTT, with more than 8 billion FTT being locked in the FTX treasury and another 1 billion FTT held by FTX’s partner Alameda Research. This means that FTX and Alameda Research have control of over 80% of the supply. This, in turn, will limit the ability of FTX to realize the value of its FTT holdings, as the market is unlikely to be able to absorb such a large amount of FTT without significantly impacting the price.
As a result, FTX’s claims of $5.5 billion in liquid assets may not be as liquid as initially thought. The locked Solana and illiquid FTT holdings complicate FTX’s bankruptcy process, as it is unclear how the company will be able to realize the value of these assets. FTX debtors may need to take additional steps to ensure that the company’s creditors receive the value of these assets.