The numbers were disclosed on Wednesday in court filings by
FTX, which hired the cryptocurrency custodial company BitGo hours after FTX
filed for bankruptcy on November 11.
The biggest worry for many of FTX's customers is they'll
never see their money again. FTX failed because its founder and former CEO Sam
Bankman-Fried and his lieutenants used customer assets to make bets in FTX's
closely related trading firm, Alameda Research. Bankman-Fried was reportedly
looking for upwards of $8 billion from new investors to repair the company's
balance sheet.
Bankman-Fried "proved that there is no such thing as a
‘safe' conflict of interest,” BitGo CEO Mike Belshe said in an email.
The $740 million figure is from November 16. BitGo estimates
that the amount of recovered and secured assets has likely risen above $1
billion since that date.
The assets recovered by BitGo are now locked in South Dakota
in what is known as “cold storage,” which means they're cryptocurrencies stored
on hard drives not connected to the Internet. BitGo provides what is known as
“qualified custodian” services under South Dakota law. It's basically the
crypto equivalent of financial fiduciary, offering segregated accounts and
other security services to lock down digital assets.
Several crypto companies have failed this year as Bitcoin
and other digital currencies have collapsed in value. FTX failed when it
experienced the crypto equivalent of a bank run, and early investigations have
found that FTX employees intermingled assets held for customers with assets
they were investing.
"Trading, financing, and custody need to be
different," Belshe said.
The assets recovered include not only Bitcoin and Ethereum,
but also a collection of minor cryptocurrencies that vary in popularity and
value, such as the shiba inu coin.
California-based BitGo has a history of recovering and
securing assets. The company was tasked with securing assets after the
cryptocurrency exchange Mt. Gox failed in 2014. It is also the custodian for
the assets held by the government of El Salvador as part of that country's
experiment in using bitcoin as legal tender.
FTX is paying Bitgo a $5 million retainer and $1,00,000 a
month for its services.