It remains unclear how much of the shortfall FTX’s creditors will face as the company’s advisers continue to work to salvage what they can from the crypto giant shocking implosion in November. But the company, once one of the world’s largest cryptocurrency exchanges, has identified more than 9 million customer accounts, Dietderich said, suggesting there will be an incredibly long line of people seeking to be bailed out.
Federal regulators have estimated losses to FTX customers to exceed $8 billion. John J. Ray III, the corporate liquidation expert who now runs the company, said lawmakers last month the company won’t be able to recoup all of its losses and expects the process to take “months, not weeks.”
FTX co-founder Sam Bankman-Fried pleaded not guilty on eight criminal counts of wire fraud and money laundering in federal court in Manhattan last week. Federal prosecutors and regulators accused him of orchestrating a years-long scheme to defraud the company’s customers by diverting their deposits to his subsidiary investment firm Alameda Research and then using the funds as a piggy bank.
“We know what Alameda did with the money,” Dietderich told the bankruptcy court Wednesday. “He bought planes, houses, organized parties, made political donations. It gave personal loans to its founders. He sponsors the FTX Arena in Miami, a Formula 1 team, League of Legends, Coachella and many other businesses, events and personalities.”
Bankman-Fried and his inner circle also made risky bets on cryptocurrency, “often unsuccessful,” Dietderich said, and invested in a number of businesses. “We know that all of this has left a shortfall in value to repay customers and creditors,” he said. “The extent of the shortfall is not yet clear. This will depend on the size of the claim pool and our recovery efforts.
Various bodies are already competing to lay claim to FTX’s holdings. Department of Justice last week said bankruptcy court that the federal government seized nearly $500 million worth of stock in Robinhood, an online stock trading company linked to Bankman-Fried. And authorities in the Bahamas, where FTX is based, have seized the company’s crypto stash. It includes a large amount of FTT, the highly volatile digital token issued by FTX, and is worth about $170 million, Dietderich told the court on Wednesday.
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