FTX, the exchange recently valued at $32 billion, has recovered $5 billion of assets. This is made up of cash and “liquid” investments and cryptocurrencies. This value doesn’t include the rest of the “illiquid” cryptocurrencies they found. Although these can’t easily sell without crashing their respective markets.
This is great news for customers. Especially after watching SBF live like a king when many believe he should already be behind bars in a substantially less comfortable location.
Fortunately, the US Department of Justice seized SBF’s Robinhood account last Monday. They added an extra $465 million dollars of assets to the recovered funds.
We don’t know if any of these funds will go to FTX customers, though. US Attorney Seth Shapiro said multiple parties have claims on Robinhood shares, including SBF himself, BlockFi, FTX, and liquidators in Antigua.
The government may distribute these funds later, but for now, they are holding them under the US proceeds of criminal law. All this because SBF has charges related to money laundering and wire fraud, among other things.
FTX Bankruptcy Proceedings
At the time of declaring bankruptcy, FTX declared that it had between $1 billion and $10 billion in outstanding customer assets.
Additionally, SBF has said in one of his tweet storms that the number was around $8 billion. This means that there isn’t yet enough money to pay back all the customers in full.
However, getting back 65% from a bankrupt company is pretty good. The US Department of Justice made a statement in September 2022. They managed to recover and repay 88.35% of funds for victims of Bernie Madoff’s Ponzi scheme. It means there is still hope that they can recover even more.
One interesting thing about US bankruptcy law is that the courts have the right to reverse payments made while the company was trading insolvent. SBF and its executives have donated hundreds of millions of dollars in recent years. Either voluntarily or by force, donors may return funds.
FTX issued an announcement in December 2022 that it requested the return of any recent donations. Perhaps we’ll find some of the donations in the pile of papers next to Joe Biden’s Corvette?
As part of the bankruptcy filing, FTX normally must disclose the names and details of its customers and creditors. Still, the judge in the case recently announced that these roughly 9 million names can remain secret for now.
The court still needs to distinguish between ordinary creditors and creditors who are also customers. This might change the order in which people are paid out.
The Big Question – Who Gets Paid First?
Who gets paid first? When a company goes bankrupt, some creditors claim their funds before others. Typically any equity holders lose their entire investment, meaning Tom Brady, Robert Kraft, and Paul Tudor Jones will be walking away empty-handed.
Creditors and customers are generally higher in the queue, and different types of bonds have different rankings.
BlockFi and Celsius both recently applied to have customer funds at the top of the queue, as these weren’t technically a part of exchange lending. Instead, the exchanges were merely holding the funds. This would mean that the funds were technically customer property the whole time.
Therefore, money cannot be a part of the pool of assets for bankruptcy proceedings. The judge hasn’t yet decided this, but if customer funds are deemed to be normal debt, then this will get in the mix with the other loans that FTX has.
It means that customers will receive a much lower amount than they should.
Can You Get Your Money Back?
How do you get your funds back? The bankruptcy court has a list of all of the customers on whom FTX bankruptcy had an impact.
When it comes time to distribute funds, there will be a process by which you will need to get in touch with the court to register yourself as a creditor. You also need to identify yourself by your account.
In addition, there are extra circumstances, as US bankruptcy law allows the reversal of certain transactions. Note that this stands if the transaction happened up to 90 days before the exchange went bankrupt.
For example, if you withdrew funds from your account weeks before FTX went bankrupt, you could be asked to send these back.
On the other hand, if you deposited funds shortly before the bankruptcy, you might get a full refund. Your money will not be in the total pool of assets for bankruptcy recipients.
We don’t yet know whether these funds will be measured in dollar value at the time of bankruptcy. However, this is more likely than the court accounting for specific amounts of each different type of cryptocurrency held by each customer.
How can you make sure you get the best out of this? Our team of experts specializes in tracing funds lost to fraud and bankruptcy. They can help you register as a creditor in this case and could potentially help you recover any funds that shouldn’t be included in the total pool of assets.
As mentioned above, any funds sent up to 90 days before bankruptcy could potentially be able to jump the queue. Get in touch with Global Fraud Protection today and see what we can do to help you out.