FTX Victims View Bankruptcy Process as ‘Second Act of Theft,’ File to Recover $8B in Forfeited Assets

As a researcher with personal experience in the crypto market and its intricacies, I find the ongoing legal battle between FTX bankruptcy victims and the estate particularly disheartening. The latest filing in the U.S. District Court for the Southern District of New York highlights the plight of customers who feel they have been victimized twice – once by the fraudulent actions of former CEO Sam Bankman-Fried, and again by the bankruptcy process itself.

As a researcher studying the ongoing FTX bankruptcy case, I can share that affected customers are requesting the court’s decision regarding the $8 billion worth of assets seized by the bankruptcy trustee. They argue these assets should be designated as belonging to the customer base rather than the bankruptcy estate. This is outlined in a recent filing submitted to the U.S. District Court for the Southern District of New York.

Last month, the estate put forward a reorganization proposal allowing nearly all creditors to receive over 118% of their original claims in cash within two months of court endorsement. However, this plan sparked dissatisfaction among some FTX customers whose assets had been frozen during bankruptcy proceedings and missed the chance to capitalize on crypto price surges.

As a researcher studying the FTX bankruptcy case, I’ve come across a filing made by victims’ attorneys Adam Moskowitz and David Boies. They expressed that the bankruptcy process has left many FTX customers feeling “wronged and plundered,” with some viewing it as an additional act of deception on par with the alleged fraud committed by former CEO Sam Bankman-Fried (SBF). SBF, who was recently sentenced to 25 years in prison for fraudulent activities, is still seen by some as the head of the same deceitful corporate entity that ran FTX prior to bankruptcy.

In November 2022, FTX experienced a significant collapse. According to the lawyers, the jury determined that SBF (Sam Bankman-Fried) did not steal less than $8 billion from FTX clients. Bankman-Fried, who was also instructed to surrender $11 billion, intends to challenge both his verdict and sentence. The filing stated, “Had it not been for SBF’s crimes for which he was found guilty—namely the theft and misappropriation of customer assets—the clients would still own their crypto investments.”

According to the filing, the bankruptcy law mandates giving preferential treatment to certain creditors at the expense of others. As a result, those holding FTX’s FTT tokens rank quite low in this hierarchy. Consequently, it is doubtful that they will be reimbursed from the estate.

Moskowitz informed CoinDesk that the full extent of the damages is uncertain as a complete account has yet to be compiled. However, it can be assured that over $8 billion in damages are likely. The value of cryptocurrencies may impact the final figure, but this remains an approximate estimation.