FTX Creditors Will Never Be Made Whole: Interim CEO John Ray

FTX CEO John Ray

Ray insisted that even the best conceivable outcome in FTX’s bankruptcy proceeding would not give victims a true recovery, making it look like the fraud never happened.

John Ray III, the interim CEO of the bankrupt cryptocurrency exchange FTX, has revealed that the company’s creditors will never be made whole despite founder and former chief executive Sam Bankman-Fried’s (SBF) claims that customers and investors incurred no harm.

Never to be Made Whole

According to a victim impact statement addressed to Judge Lewis Kaplan of the United States District Court for the Southern District of New York on March 20, Ray believes that FTX customers would never be in the same economic position they would have been had they not crossed paths with SBF and his altruism brand.

Ray insisted that even the best conceivable outcome in FTX’s Chapter 11 bankruptcy proceeding would not give affected parties a “true, full economic recovery” to the point that it would look like the fraud never happened.

One major reason for Ray’s statements is the rising value of cryptocurrencies, which is not reflected in the funds to be disbursed to creditors. According to the Bankruptcy Code, each creditor’s claim must be valued as of the bankruptcy date. Since the values of many cryptocurrencies have risen substantially since the petition date, November 2022, FTX victims would be receiving less than the current value of their assets. Bitcoin alone has risen over 400%.

SBF is Making False and Reckless Statements 

In addition to outlining FTX creditors’ losses, Ray tagged several statements recently made by SBF in his sentencing submission as “categorically, callously, and demonstrably false.”

In late February, SBF claimed FTX and its affiliated companies were solvent when they filed for bankruptcy. The convicted fraudster also said customer funds were on the exchange, not lost, reducing the harm done to creditors to zero.

“The value we hope to return to creditors would not exist without the tens of thousands of hours that dedicated professionals have spent 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,” Ray said, insisting that SBF’s claims were badly asserted.

The FTX interim CEO explained that SBF relied on misinterpretations of materials prepared and publicly released by the exchange’s current management at his instruction before a January 31 hearing. He said the statements were both false and reckless, and SBF used them in an attempt to land a lighter jail term.