Sam Bankman-Fried, who was the founder and later lost the collapsed cryptocurrency exchange FTX, is not getting any sympathy from his ex-clients. However, his efforts to make it look like he wasn’t aware of the damage he caused are being considered to be salt on the wound.
The lawyers of FTX are managing a situation where nearly a million of their customers have come forward through submitting victim impact statements to the court, sharing their stories about the financial distress they are facing now.
With these statements, the picture is rather bleak and it is clear that many of the FTX users were not just interested in cryptocurrency as a hobby, but rather they invested.
That is with the hope of achieving specific financial goals like saving for retirement, paying for their children’s education, or purchasing their own home. These dreams were burst when FTX went down.
Bankman-Fried Maintains Innocence
Despite all the collected evidence and the problems of those customers, the defense team of Bankman-Fried still insists on the strange position.
They maintain that the FTX liquidity problem was a simple liquidity issue, and a temporary glitch and that no one incurred any harm by this. They state that all customers would be covered by the insurance.
This picture-perfect story is being boisterously challenged by the CEO of FTX, John Ray, and the attorneys representing the victims. Ray highlights that Bankman-Fried’s conduct did not involve only one victim.
He claims that FTX was in violation of its terms and conditions by lending customer funds to Alameda Research, a sister hedge fund closely associated to Bankman-Fried, for speculative investments. This was a risk the customers could have avoided.
Losses Mount for FTX Customers
The whole situation becomes more of a slap in the face as the bankruptcy process is built in such a way that it favors FTX’s former customers.
Their status as unsecured creditors means that they will be paid according to the value of their cryptocurrency assets on the date of the bankruptcy and not at the much higher value they have now.
This means that though they may end up receiving compensation, it does not fully represent the potential of their investment value.
Even more complicated is the dispute as to the role of FTT (the FTX exchange token). At the moment, the bankruptcy estate is valued at $0 in order to estimate the distribution, but the market capitalization of the company is over $690 million. This choice cancels the worth of the FTTs for the majority of clients which leads to extra financial losses.
March 28th was a day appointed for sentencing and the court will determine the level of punishment the accused deserves.
The determination of a sentence for FTX would probably depend predominantly on the impacts its customers have suffered.
The jury will have to consider the stories of lost funds and broken dreams of his victims along with the defendant’s claims of innocence and the limited defense prepared by his team.
