Battle Over FTX's Assets: Victims and Debtors Fight Over Forfeited Resources
Summary:
Numerous factions are vying for the assets involved in ex-FTX CEO Sam Bankman-Fried's criminal case. Legal claims have been filed stating that these resources should go to victims of the defunct exchange rather than settling Bankman-Fried's $11 billion court ruling. Additionally, a group of claimants, also victims of Bankman-Fried's alleged theft, has filed a petition to have the forfeited assets in the case directed to FTX users instead of debtors. The judge hasn't decided on a potential hearing or judgment over these petitions yet. Meanwhile, some objectors argue that the proposed reorganization plan of FTX's bankruptcy case doesn't allow for losses related to U.S. tax.
Various factions are battling over the assets implicated in the criminal case against former FTX CEO Sam Bankman-Fried, who is presently serving a 25-year sentence in a federal penitentiary.
In a legal document filed on June 14 at the U.S. District Court for the Southern District of New York, attorneys for the FTX debtors and the company's Bahamian division, FTX Digital Markets, contend they have the "superior right" to the assets potentially used to fulfill the court's $11 billion verdict against Bankman-Fried. The counsel asserted that FTX's airplane, funds stored in Signature Bank, Farmington State Bank, and Silvergate Bank, along with the sale of Robinhood's stock and political donations from previous FTX executives, should serve the victims of the collapsed exchange instead of satisfying Bankman-Fried's judgement.
According to the June 14 submission, modifying the Preliminary Forfeiture Order to allow return of the Specific Property to the Debtors and/or FTX Digital will be beneficial for all the involved parties in the Debtors’ Chapter 11 bankruptcy case and FTX Digital’s liquidation process in the Bahamas, including victims of Bankman-Fried’s crimes. The efficient means of delivering the value of the Specific Property to over a million victims of Bankman-Fried’s unlawful scheme would be via Debtors' present claim administration framework and procedures.
In response to this petition filed by the debtors were two more filed on June 14 by lawyers representing the firm and the trustees of Emergent Fidelity Technologies. This enterprise had been in possession of more than 55 million Robinhood shares for Bankman-Fried and his FTX co-founder Gary Wang. The submission only focused on the Robinhood shares and $20 million held by Emergent and not the other FTX assets claimed by the debtors.
Simultaneously, there is a group of claimants who fell prey to SBF’s theft. They're represented by crypto attorneys Adam Moskowitz and David Boies, and have filed their own petition, demanding a judge allow the forfeited assets in the criminal case to go to FTX users rather than the debtors. One of the plaintiffs in this case is Sunil Kavuri, an FTX customer who stood as a witness against Bankman-Fried.
As of this report’s publishing, no decision has been registered by Judge Lewis Kaplan concerning a possible hearing or ruling over the three petitions. A proposed reorganization plan was filed for FTX’s bankruptcy case in the District of Delaware in May, aiming to repay creditors, but some like Kavuri disagreed, arguing that the proposition didn’t address losses resulting from U.S. taxes.
Bankman-Fried was found guilty of seven felony charges tied to his misuse of client funds between FTX and his other firm, Alameda Research. In March, he was sentenced to 25 years by Judge Kaplan. His appeal notice was submitted by his lawyers, and he will be held at the Metropolitan Detention Center in Brooklyn pending the process.
Other FTX and Alameda executives involved in the downfall of the firms, including Wang, Caroline Ellison, and Nishad Singh, pleaded guilty and are awaiting sentencing after their testimonies at Bankman-Fried's criminal trial. Ryan Salame, the prior co-CEO of FTX Digital Markets and the sole charged individual who did not testify at SBF's trial, received a 90-month sentence in May. He is slated to commence his prison term on August 29.
Published At
6/17/2024 9:12:33 PM
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