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Defunct crypto exchange FTX has amassed a government debt of $9 billion in the form of fines and penalties.
The revelation came in a letter to Judge Lewis Kaplan from the new CEO of FTX, John J Ray III, ahead of Sam Bankman-Fried's sentencing.
Ray refuted claims from SBF's team that FTX was “solvent at the time that the Chapter 11 petition was filed.”
“As the lead professional of a very large team who has spent over a year stewarding the estate from a metaphorical dumpster fire to a debtor-in-possession approaching a confirmed plan of reorganization that will return substantial value to creditors, I can assure the Court that each of these statements is categorically, callously and demonstrably false,” Ray said.
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Ray said his team spent “thousands of hours digging through the rubble of Mr. Bankman-Fried’s sprawling criminal enterprise to unearth every possible dollar, token or other asset that was spent on luxury homes, private jets, overpriced speculative ventures and otherwise lost to the four winds.”
When Ray took the helm at FTX, the exchange only had 105 Bitcoins left on it while customer claims amounted to 100,000 BTC, according to his letter. He warned that customers affected by FTX's collapse will not be returned to the same “economic position” they were in before the exchange's demise.
“Even the best conceivable outcome in the Chapter 11 proceeding will not yield a true, full economic recovery by all creditors and non-insider equity investors as if the fraud never happened,” Ray said.
He explained that the recovery of funds hinges on FTX clearing its debt to the government, which it accrued through fines.
“Recoveries to customers and creditors depend entirely on the voluntary subordination of over $9 billion in governmental claims for fines and penalties otherwise payable as a result of Mr. Bankman-Fried’s crimes,” he said.
Last week, US prosecutors asked Kaplan to jail SBF for 40 to 50 years for "orchestrating one of the largest financial frauds in history."
“His life in recent years has been one of unmatched greed and hubris; of ambition and rationalization; and courting risk and gambling repeatedly with other people’s money. And even now Bankman-Fried refuses to admit what he did was wrong,” the prosecutors said.
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“Having set himself on the goal of amassing endless wealth and unlimited power — to the point that he thought he might become President and the world’s first trillionaire — there was little Bankman-Fried did not do to achieve it."
