© Reuters. FILE PHOTO: An FTX emblem is seen via damaged glass on this illustration taken, December 13, 2022 REUTERS/Dado Ruvic/Illustration/File Photograph
By Dietrich Knauth
NEW YORK (Reuters) – Crypto change FTX mentioned it expects to barter U.S. authorities claims in its chapter right down to $3 billion to $5 billion, leaving no cash for shareholders and contradicting a “reckless and false” declare by founder Sam Bankman-Fried that FTX’s collapse brought on no hurt.
FTX revealed these estimates in court docket paperwork on Wednesday in response to founder Sam Bankman-Fried’s claims that he ought to obtain a light-weight jail sentence as a result of FTX will be capable to repay its clients “in full”. Bankman-Fried was convicted in November of stealing $8 billion from FTX clients.
FTX’s present CEO John Ray mentioned in court docket filings in Delaware chapter court docket that Bankman-Fried had distorted the corporate’s current statements about its potential to repay clients in chapter to argue that there was “zero” hurt to FTX clients, lenders and traders.
“All of those statements are each reckless and false,” Ray wrote.
“Even one of the best conceivable end result within the Chapter 11 continuing won’t yield a real, full financial restoration by all collectors and non-insider fairness traders as if the fraud by no means occurred,” he mentioned.
FTX estimates that it’ll have $13.7 billion in belongings to pay $31.4 billion in reliable claims, together with $9.2 billion in buyer claims and $17 billion in claims asserted by the U.S. Commodity Futures Buying and selling Fee and the Inner Income Service.
FTX mentioned in January that it expects to pay clients “in full,” however that assertion got here with a significant caveat: It’s going to worth buyer claims based mostly on the worth of crypto in November 2022, and clients will obtain no profit from a major rise in crypto costs since that date. Many FTX clients are “extraordinarily sad” with FTX’s proposed reimbursement, Ray wrote.
FTX proposed chapter reimbursement nonetheless faces important obstacles, together with ongoing negotiations over the $17 billion in claims asserted by the U.S. authorities.
FTX is working in the direction of a settlement that may permit FTX to repay its clients earlier than the federal government and cut back the full authorities claims to between $3 billion and $5 billion. The U.S. authorities has agreed to prioritize buyer reimbursement in current crypto bankruptcies, together with the BlockFi and Genesis World circumstances.
If the federal government doesn’t comply with prioritize FTX clients, its claims may considerably dilute the quantity out there to repay clients, FTX mentioned.
One group that can positively be harmed by Bankman-Fried’s fraud are FTX traders and shareholders, who’ve little hope of recovering any cash from the corporate’s chapter, based on FTX. FTX won’t find the money for to pay shareholders, who’re final in line for reimbursement after the corporate’s clients, its lenders and the U.S. authorities.