Users and consumers who lost money on the FTX crypto exchange aren’t going to be able to find much compensation.
- After the precipitous fall of FTX, it appears that very few users of the exchange will be compensated money that they were unable to withdraw before the company was bankrupted.
- Speaking before the House Financial Services Committee on Tuesday, restructuring lawyer John J. Ray III says the majority of users won’t get their money back—and the amount lost will run into the billions.
- “At the end of the day, we’re not going to be able to recover all of the losses here,” Ray says.
Why it’s News
The precipitious fall of FTX only began on November 8 but in the past month the company has gone bankrupt, the crypto economy crashed, and the owner Sam Bankman-Fried (SBF) was charged with fraud by the Securities and Exchange Commission.
Billions of dollars were tied up behind the scenes as the exchange faced a liquidity crisis that destroyed the company and halted withdrawals for millions of FTX users. Efforts have been made to offer relief programs for those affected, including some major celebrities like football player Tom Brady and comedian Larry David.
FTX’s assets are currently tangled and difficult to track, with several large real estate properties in the Bahamas being seized by the government and other funds have disappeared or been lost. If these funds can be recovered, it may take years. The majority of users will still not be able to fully cash out their holdings.
“Ray expects international customers to fare worse than U.S. customers. He noted that the number of clients and the volume of trading on the U.S. exchange of FTX was much smaller than on FTX.com,” says Bloomberg.
Backing up a Bit
SBF was scheduled to appear before the same House Financial Services Committee on Tuesday but was arrested by the Bahaman government He is expected to be extradited to the U.S. and face charges of conspiracy and wire fraud.
“The Securities and Exchange Commission in the morning accused Bankman-Fried of defrauding investors, and the Commodity Futures Trading Commission sued him, along with FTX and the company’s sister trading firm, Alameda Research, for commodity-law violations,” says Bloomberg.
The collapse of FTX represents one of the largest financial collapses in the history of crypto, with Ray calling it one of the worst-run financial organizations he’s ever seen.