FTX CEO says former exchange faces $9B in government claims

John J. Ray, the new CEO of FTX, penned a letter to Judge Lewis Kaplan regarding former FTX CEO Sam Bankman-Fried’s upcoming sentencing.

Ray, who’s overseeing the bankruptcy of the former crypto exchange, pushed back on claims made by Bankman-Fried and his legal team that the former executive didn’t lose money and 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.

Ray said that his team had to spend “thousands of hours” dedicated to “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.”

According to the letter, FTX only had 105 bitcoins left on the FTX.com exchange when Ray took over. Customer claims neared 100,000 bitcoins.

The letter is not the first time that Ray referenced the challenges that his team faced trying to recover assets from FTX. In June of last year, the debtors submitted a report to the court detailing how they had uncovered $7 billion of the $8.7 billion owed to customers.

Ray said that despite Bankman-Fried’s claims to the contrary, customers suffered due to his mismanagement of FTX. He stated that former customers of the now-defunct exchange won’t be returned to the same “economic position” they were in before FTX collapsed.

“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.

Additionally, Ray wrote that certain issues will need to be resolved before the customers can be paid back.

“Recoveries to customers and creditors depends 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.

Bankman-Fried lives a life of “delusion” if he believes that FTX was either solvent or safe when he left in November of 2022, Ray added.

Despite certain assets or investments rising in value — like FTX’s stake in Anthropic — Ray believes that the court should look closely at the damage done to former customers through the mismanagement of the exchange.

“I can clearly reflect on that time and I am quite confident that but for the work of a very large team of dedicated individuals, billions of dollars would have been lost or stolen and the recoveries to customers would be a fraction of their expected recovery,” he added.

Ray’s victim impact statement comes after the government asked Judge Kaplan to consider a sentence of 40 to 50 years for the former CEO.

The government said it was seeking a sentence that “underscores the remarkably serious nature of the harm to thousands of victims.”

Bankman-Fried’s team, however, petitioned the court for a mere 63 to 78 months in prison, claiming that he’s not the “evil genius” that the media allegedly made him out to be.

The document, filed last month, included over 25 letters of support from friends and family of Bankman-Fried.

After a month-long trial in November of last year, Bankman-Fried was found guilty of all seven counts by a jury.

The former executive’s sentencing is set for March 28.

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