FTX: Are US customers more likely to get their cash back?
A hearing held by the US House Committee on Financial Services heard FTX’s newly-appointed CEO John Ray III testify on the downfall of the crypto exchange.
Ray addressed the committee about what he has uncovered about the demise of what was once the third-largest cryptocurrency exchange – and stated that the way FTX handled consumer funds was perceived as “old fashioned embezzlement” in a process he described as “not sophisticated at all.”
“This is really old-fashioned embezzlement,” said Ray, before adding that the way the firm operated to fill the pockets of its executive team was entirely opposite to how a highly sophisticated fraduluent crime would unfold at a firm.
“This is just taking money from customers and using it for your own purpose. Not sophisticated at all,” said Ray.
FTT to USD
Bankman-Fried previously claimed US subsidiary was “fully solvent”
In contrast to Ray’s testimony that claimed the cryptocurrency exchange was not a solvent entity, former FTX boss Sam Bankman-Fried, who was arrested in the Bahamas on 12 December, claimed that the US arm of FTX – known as FTX.US – should in fact be fully solvent.
During a live interview at the New York Times and DealBook summit, Bankman-Fried remained adament that US customers should be able to access their funds.
He reiterated his comments in a 1 December tweet about the financial situation of FTX’s US arm that he was “fairly sure” that FTX.US was solvent and that customers should be able to recover their funds.
Expanding on DealBook:
— SBF (@SBF_FTX) December 1, 2022
When I filed, I'm fairly sure FTX US was solvent, and that all US customers could be made whole.
To my knowledge, it still is today.
I was expecting that to happen. I'm surprised it hasn't. I'm not sure why US withdrawals were turned off.
FTX failed to keep records
However, yesterday’s hearing before the US House highlighted that there was “no record keeping whatsoever” at the firm, and that it would be unlikely that FTX customers would have their funds returned to them.
Ray described the idea that FTX’s US customers could regain their funds was “speculative” and he added that despite having a hole in the US firm's balance sheet, the restructuring team was trying to get customers money back “as soon as possible.”
“Even in the most failed companies, you have a fair roadmap of what happened,” said Ray. “We’re dealing with literally [a] sort of a paperless bankruptcy in terms of how they created this company. It makes it very difficult to trace and track assets.
“At the end of the day, we’re not going to be able to recover all the losses here.”
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