It’s not yet clear how much of a shortfall FTX’s creditors will face as the company’s advisers continue to work to salvage what they can from the crypto giant’s 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 looking to be made whole.
Federal regulators have estimated FTX customer losses to exceed $8 billion. John J. Ray III, the bankruptcy expert who now heads the company, told lawmakers last month that the company will not be able to recover all of its losses and expects the process to take “months, not weeks.”
FTX co-founder Sam Bankman-Fried pleaded not guilty to eight criminal charges of wire fraud and money laundering in federal court in Manhattan last week. Federal prosecutors and regulators have accused him of orchestrating a yearlong scheme to defraud the company’s clients by diverting their deposits to his affiliated investment firm, Alameda Research, and then using the funds as a personal piggy bank.
“We know what Alameda did with the money,” Dietderich told the bankruptcy court Wednesday. “It bought planes, houses, threw parties, made political donations. It provided personal loans to the founders. It sponsored 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 cryptocurrency bets, “often unsuccessfully,” Dietderich said, investing in a variety of businesses. “We know that all of this has left a shortfall in the value to repay customers and creditors,” he said. – The size of the deficit is not yet clear. It will depend on the size of the damage and our recovery work.”
Various authorities are already competing to claim FTX’s holdings. The Justice Department last week told the bankruptcy court that the federal government had seized nearly $500 million worth of stock in Robinhood, the stock trading company linked to Bankman-Fried. And the authorities in the Bahamas, where FTX was based, have seized a holding of the company’s crypto. It includes a large amount of FTT, the highly volatile digital token issued by FTX, and is worth about $170 million, Dietderich said in court Wednesday.