FTX’s lawyers have reportedly recovered $5 billion, but divested customers could still end up at the back of the queue.
According to Adam Landis, an attorney at FTX’s legal counsel Sullivan & Cromwell, FTX has found $5 billion in cash, liquid crypto assets, and liquid crypto investments to add to FTX’s bankruptcy estate for reimbursing creditors.
VC Suggests Bankman-Fried Pushing for a Lighter Sentence
Cinneamhain Ventures General Partner Adam Cochran speculated whether FTX’s former CEO Sam Bankman-Fried revealed the money’s location to “weasel out of jail.”
Bankman-Fried was arrested in the Bahamas and extradited to the U.S. after his FTX cryptocurrency exchange bankruptcy on Nov. 11, 2022.
He has pleaded not guilty to eight criminal counts in the U.S., including wire fraud and political campaign funding violations. He is out of jail under strict bail conditions pending a criminal trial in Oct. 2023. His acolytes, Caroline Ellison, and Gary Wang have both pleaded guilty to federal indictments.
Now, Cochran argues, SBF, as he’s commonly known, wants to get off on a lighter jail sentence by magically revealing the location of money that would see investors receive at least five of the $8 billion they are collectively owed.
Cochran also suggested that the timing of the discovery was suspicious, given the amount of money involved and how the funds escaped the scrutiny of FTX’s financials in the early days following its bankruptcy filing. In Dec. 2022, FTX’s management claimed they could only locate about $1 billion.
Windfall May Not be Good News for FTX Customers
A judge presiding over the bankruptcy case of collapsed crypto lender Celsius recently ruled that, according to the company’s terms and conditions, certain customer assets became the property of Celsius after they were deposited. Hence the customers became unsecured creditors, pushing them down the pecking order in terms of compensation.
Additionally, Landis noted that SBF’s extension of a $65 billion credit line from FTX to Alameda Research caused a notable shortfall in the funds needed to repay FTX customers and creditors.
Put simply, the FTX’s $5 billion windfall could be scant good news for its customers.
Bankruptcy Judge Throws Out Calls for ‘Independent Examiner’
Four American senators recently penned a letter to Judge John Dorsey of the Delaware Chancery Court presiding over the FTX bankruptcy case.
The lawmakers suggested that Sullivan & Cromwell could not be objective because of its history of advising FTX. The letter instead called for an independent examiner to investigate the events leading up to the collapse of FTX on Nov. 11, 2022.
Dorsey slammed the letter as constituting improper court protocol that would not sway judicial decisions. He later added that he would only consider the material presented in open court when making a ruling.
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