Brad Garlinghouse Reveals Ripple Had Inconsequential FTX Exposure of $10M in XRP

Garlinghouse is not optimistic due to SBF’s alleged fraud but hopes Ripple can recover a substantial amount of the funds through the courts.

Ripple chief executive officer Brad Garlinghouse, in a recent fireside chat on CNBC’s Tech Transformers at Davos, has disclosed that the blockchain payments company had exposure to FTX.

Garlinghouse revealed that Ripple leased about $10 million in XRP to the now-bankrupt crypto exchange.

“… we did have some exposure to FTX,” the Ripple chief said. “I think … we’ve publicly shared before there’s around just over $10 million of XRP we had leased to FTX that they use for various things on FTX… I’m hopeful that through the bankruptcy process, we get some or all of it back but uh it’s not too consequential to the business.”

Unsurprisingly, Garlinghouse’s statements have raised some eyebrows, as finance author and coach Linda P. Jones questioned the nature of the transaction. 

Brad said they "leased" over $10 million of XRP to FTX. I don't remember #BradGarlinghouse or #Ripple saying they "leased" XRP to anyone before, do you @digitalassetbuy or @DigPerspectives? https://t.co/yIrmwD57KF

— Linda P. Jones (@LindaPJones) January 18, 2023

However, it is worth noting that Ripple regularly provides short-term XRP leases to market makers and participants from XRP meant for sales, per its quarterly reports. Usually, these leases are returned to Ripple. Per Ripple’s last quarterly report on Q3 2022, the total amount of outstanding leases stood at 91.1 million XRP. It is currently unclear what guardrails are in place if a counterparty fails to return leased XRP.

The Ripple chief asserted that it is unclear what the company will get back from the lease, considering Sam Bankman-Fried’s alleged fraud. According to Garlinghouse, while other companies had too much exposure, Ripple’s XRP lease represented only about 1% of its liquid assets. Noting that he would rather not lose that money, the CEO said he is hopeful that Ripple will recover some or all of it during the bankruptcy proceedings. However, he asserts that it is not a detrimental loss to the business.

“And for us… that I think represented about 1% of liquid assets,” Garlinghouse said. “I would rather not lose that money. And I’m hopeful that through the bankruptcy process, we get some or all of it back, but it’s not too consequential to the business.”

Backing his claim of Ripple’s strong balance sheet, Garlinghouse points out that the firm continued to hire new staff as its business expanded to serve new customers.

Ripple Interest In FTX Assets

It is worth noting that the Ripple chief had previously disclosed an interest in acquiring FTX assets, particularly stakes in institutional-facing businesses, per a report from The Times. Notably, Garlinghouse said this as he revealed that he had received a call from SBF days before the exchange filed for bankruptcy. The CEO of the blockchain company disclosed that he had expressed willingness to provide the exchange with liquidity for a stake in businesses that could benefit it. 

While he admits that any such acquisition would now be more difficult in light of bankruptcy proceedings, he disclosed that the firm is still looking into it.

FTX’s Stunning Collapse

FTX and about 130 subsidiaries filed for bankruptcy protection last November after a bank run revealed an estimated $8 billion hole in its balance sheet. The company’s valuation plummeted from about $32 billion to $1 in 24 hours.

In a civil lawsuit, the US Securities and Exchange Commission has accused former FTX CEO SBF of multi-year fraud that saw him regularly divert customer funds for personal use and investments. The erstwhile crypto billionaire is facing about 8 counts of fraud in the US Southern District of New York, excluding civil suits from the SEC and the Commodities Futures Trading Commission.

SBF is on bail on personal recognizance secured by a controversial $250 million bond. He faces over 100 years in prison if found guilty on all charges, to which he recently entered a plea of “not guilty.”