In a fiery victim impact statement, FTX’s CEO showed no remorse for the cryptocurrency company’s disgraced founder, Sam Bankman-Fried, who reportedly had billions of dollars stolen in one of the biggest scams in history. It accused it of making “clear, callous and patently false” claims about customer losses. .
A statement from John J. Ray III, a seasoned corporate restructuring expert who oversaw FTX’s bankruptcy, echoed Bankman-Fried’s assertion that there was “no harm to customers, lenders and investors” and that the FTX entity “had no losses.” The claim was directly refuted. It was a solvent when the company collapsed in November.
“Mr. Bankman-Fried cited 14 lines of the transcript of the Jan. 31, 2024 bankruptcy court hearing and three news reports about the hearing,” Ray wrote in a statement filed ahead of Bankman-Fried’s sentencing Friday in federal court in New York. . “But Mr. Bankman-Fried ignored pages of important commentary, qualifications and caveats from that hearing.”
“The damage was enormous. Remorse is non-existent. At least the effective altruism by which Samuel Bankman-Fried lived was a lie,” Ray wrote.
Bankman-Fried, who cultivated an image as a socially conscious genius while building FTX into a cryptocurrency giant, was found guilty of fraud and conspiracy last November. Prosecutors allege he orchestrated a scheme over several years to leverage client funds to finance risky gambling, luxury real estate purchases and political donations.
Ray said a “very large team of dedicated individuals” had worked hard over the past 16 months to recover the money and stabilize FTX’s operations, but it was unlikely Bankman-Fried’s victims would be made whole. “Government creditors and non-internal shareholders have suffered and continue to suffer,” he said.
Bankman-Fried’s claims that FTX was solvent were contradicted by “backdoor” borrowings by sister trading firm Alameda Research, which meant customer account statements showing cryptocurrency holdings were “incorrect,” Ray said. When Bankman-Fried was ousted, only 105 bitcoins remained on the FTX exchange, against user claims of nearly 100,000 bitcoins.
“Why did the Bitcoin disappear? The jury concluded beyond a reasonable doubt that Mr. Bankman-Fried stole the Bitcoin and converted it to something else,” Ray wrote. “For that reason, we cannot return it in kind to the victims.”
Wray said the expected recovery is “by no means guaranteed” and relies heavily on “voluntary submission” to government fines of more than $9 billion, negotiated settlements with U.S. agencies and victories in future legal battles.
Last November, FTX’s bankruptcy shocked the cryptocurrency industry and sent Bitcoin falling below $16,000. At least $8 billion in customer deposits were lost in what authorities called one of the largest financial frauds in U.S. history.
Bankman-Fried, who once appeared on magazine covers and conference stages, now faces up to 50 years in prison when she is sentenced March 28 by U.S. District Judge Lewis Kaplan. Bankman-Fried’s lawyers have argued that he should receive a much lighter punishment.
The sentencing comes just over a year after Ray, who previously oversaw the liquidation of Enron, took control of FTX in a last-ditch effort to stabilize the company. Ray said his team’s first action was to request an automatic stay in bankruptcy court to prevent a “catastrophic collapse resulting from Mr. Bankman-Fried’s crimes” from engulfing the cryptocurrency ecosystem.
Ray explained that Bankman-Fried continues to live a “life of delusions”. The cryptocurrency founder used “radical honesty on Twitter” to disparage the restructuring expert, while citing a private post in which he claimed he was “ready to make his clients whole.”
“FTX was run for a very short period of time by Mr. Bankman-Fried with arrogance, arrogance and a complete lack of respect for basic norms of the law, which is all the more inexcusable given his privileged upbringing,” Ray said. “I wrote.
Bankman-Fried’s lead attorney did not immediately respond to a request for comment.
