TOKYO: FTX Japan, part of collapsed cryptocurrency group FTX, is expected to be sold off in a bankruptcy process spanning the globe.
Parent company FTX Trading said on Saturday it was launching a strategic review of global assets following a Chapter 11 bankruptcy protection filing in the US.
FTX Japan is seen as a prize part of the group, given its solvent balance sheet, as are European unit FTX EU and some other subsidiaries.
FTX Japan has cash and deposits of ¥19.6 billion (US$140 million) and equity capital of about ¥10 billion, disclosures show. It holds crypto assets for more than 100,000 customers, but has more assets than liabilities.
The Japanese unit reportedly has been approached by at least one potential buyer through an investment bank.
FTX, brought down by a liquidity crisis this month, owes more than US$3 billion to its 50 largest creditors alone, new disclosures show. Total liabilities are estimated at more than US$10 billion.
FTX Trading and more than 100 affiliated companies filed for Chapter 11 protection this month, after a failed attempt to sell the crypto group to rival Binance.
John Ray III, the Enron liquidation veteran appointed to the lead the group through bankruptcy, said in filings he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information.”
However, Ray said in a statement on Saturday that “based on our review over the past week, we are pleased to learn that many regulated or licensed subsidiaries of FTX, within and outside of the US, have solvent balance sheets, responsible management, and valuable franchises.”
When FTX’s impending collapse became clear on the night of Nov 10, Japan’s Financial Services Agency issued a protective order for assets held in the country.
Any unauthorised move on Japanese assets to repay creditors would violate the FSA order.
The order allows FTX Japan to be acquired by a creditworthy buyer able to protect its assets.
“An acquisition for the entire Japanese business would be close to an ideal solution,” said a senior FSA official who requested anonymity.
Proceeds from a sale of FTX Japan could be applied toward creditors’ claims.
This approach could keep the Japan unit separate from the FTX group’s global liabilities so that Japanese clients take a smaller financial hit than if their investments were pooled with other FTX assets.
“If there is a global scramble for assets, the wealth of assets in Japan will be targeted,” another FSA official said. “A sale would be a positive development, depending on the terms of the deal.”
Ray said in a statement Saturday that the group would “explore sales, recapitalisations, or other strategic transactions” of FTX Japan and other subsidiaries in the coming weeks.
The group has engaged Perella Weinberg Partners as lead investment bank in the strategic review.