In November 2022, the former third-largest crypto exchange in the world FTX and its sister company Alameda Research collapsed spectacularly. The investigation revealed that company founder Sam Bankman-Fried and his team had embezzled billions in customer money. In March of this year, Sam Bankman Fried was sentenced to 25 years in prison. Back in November, a jury found him guilty on all charges. Now the customers who lost their money due to the bankruptcy should be compensated. The company filed a plan of reorganization and a disclosure statement with the United States Bankruptcy Court. It basically says that the company wants to pay off all non-state creditors – with interest. Because after FTX filed for Chapter 11 bankruptcy, it became known that the exchange had a huge deficit. However, the repayment only affects customers whose portfolio was less than 50,000 USD at the time of bankruptcy. They should get around 118% of the money that FTX owes them. In individual cases it can even be 142%.
Where does FTX’s money suddenly come from?
The interesting question, however, is: Where does FTX’s money suddenly come from? After selling all assets, that’s around $16.3 billion. This was made possible by the price rally, for example in Solana.
The assets were held by Alameda Research and FTX Ventures, plus money from various legal disputes. The creditors owe the fact that this sum was raised to the meticulous work of John Ray, the insolvency administrator and his team. Ray and his team have been searching through the rubble of FTX and Alameda Research for assets to compensate creditors. Ray also wrote to Judge Lewis in the FTX case, rejecting the assertion of Sam Bankman Fried and his lawyers that FTX was solvent at the time of bankruptcy and that customers had not lost any money. This is “demonstrably false and callous”. For example, when Ray took over as CEO at FTX, the company only had 105 Bitcoin in its possession – but customers were entitled to almost 100,000. Incidentally, John Ray was also in charge of winding up Enron, one of the largest corporate bankruptcies in the USA. Here, the company’s management had embezzled around 60 billion US dollars.
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