- FTX harm was vast, and some funds couldn’t be recovered.
- FTX victims’ compensation will be valued at November 2022 prices.
Bankrupt FTX’s victims expecting compensation will never be made entirely whole. This development follows a painful reminder that victims will be refunded based on the bear market values in November 2022, when the exchange ceased operations.
In a victim impact assessment letter to the New York District Court Judge Lewis Kaplan, the current FTX CEO, John J. Ray III, castigated Sam Bankman-Fried (SBF) and his legal team.
He termed SBF “delusional” for lying to customers that FTX was solvent and would fully refund them.
In January, SBF’s legal team argued that Judge Kaplan should consider 6.5 years in prison instead of 40-50 years because there was zero harm to FTX customers, lenders, and investors amidst the estate recovery.
The vast harm to FTX customers
During the FTX trial, prosecutors recommended 40-50 years of prison for SBF, citing over $10 billion stolen by the former FTX chief. SBF will be sentenced on 28th March.
Ray’s scathing impact assessment supported the prosecutors’ inclinations. Uncovering the dire state of FTX coffers and the extent of SBF’s damage, Ray noted;
“The harm was vast. The remorse is nonexistent. Effective altruism, at least as lived by Sam Bankman-Fried, was a lie.”
Some lost money was recovered, and the recent BTC rally boosted it. However, Ray cautioned that victims can’t get money that can not be recovered;
“Like $150 million in bribes that prosecutors say were paid to Chinese government officials or nearly 100,000 bitcoins listed on customer statements even though only 105 Bitcoins were left on the FTX.com exchange.”
Ray added that FTX victims were “very unhappy” to learn the bankruptcy code dictates all claims will be valued as of November 11, 2022.
The fact that crypto assets were 400% lower than today compared to the dictated valuation date means that the victims can’t be fully made whole.
One of the big four accounting firms, PWC, is covering the exchange’s claims process before official compensation begins.
However, victims’ suffering won’t lessen given that the compensation will not be in crypto assets but USD valued at 2022 bear market prices. Besides, the value could drop because some lost funds weren’t recovered.