“Why were the Bitcoins missing?”: FTX insolvency leader criticizes SBF’s “delusional” defense

In a heated victim impact statement, FTX's chief executive accused the crypto company's disgraced founder Sam Bankman-Fried of “categorically, callously and demonstrably false” peddling claims of customer losses while showing no remorse for the billions allegedly lost were stolen in one of the largest fraud cases in history.

The testimony of John J. Ray III, a veteran corporate restructuring specialist who oversaw FTX's bankruptcy, directly refuted Bankman-Fried's assertion that “the damage to customers, lenders and investors is zero” and that money “is not lost.” “ is because FTX companies had done so. When the company collapsed in November, it was solvent.

“Mr. Bankman-Fried cites 14 lines of the transcript of the January 31, 2024 bankruptcy court hearing and three news reports about the hearing,” Ray wrote in the statement, which was filed in federal court in New York on Friday before Bankman-Fried's sentencing. “However, Mr. Bankman-Fried ignores pages and pages of important comments, qualifications and reservations from this hearing.”

“The damage was enormous. The remorse is non-existent. “Effective altruism, at least as practiced by Samuel Bankman-Fried, was a lie,” Ray wrote.

Bankman-Fried, who cultivated an image of a socially conscious wunderkind as he turned FTX into a crypto giant, was convicted of fraud and conspiracy in November. Prosecutors allege he orchestrated a years-long scheme to use customer money to finance risky bets, luxury real estate purchases and political donations.

Ray said that while a “very large team of dedicated individuals” have been working feverishly over the past 16 months to recover funds and stabilize FTX’s operations, Bankman-Fried’s victims are unlikely to be healed, pointing to this noted that “customers, non-governmental creditors, governmental creditors and non-insider shareholders have suffered and continue to suffer.”

Bankman-Fried's claim that FTX was solvent was contradicted by “backdoor” borrowing by Alameda Research, a sister trading firm, which meant customer account statements showing cryptocurrency holdings were “false,” Ray said. When Bankman-Fried was ousted, there were only 105 Bitcoins left on the FTX exchange, despite users demanding almost 100,000 Bitcoins.

“Why were the Bitcoins missing? “A jury has concluded beyond a reasonable doubt that Mr. Bankman-Fried stole them and converted them into other things,” Ray wrote. “For this reason, they cannot be returned in kind to his victims.”

Expected repayments are “in no way assured” and remain highly dependent on the “voluntary subordination” of more than $9 billion in government fines, Ray said, as well as amicable settlements with U.S. authorities and victory in future ones Litigation.

FTX's implosion last November sent shockwaves across the crypto industry, pushing Bitcoin below $16,000. At least $8 billion in customer deposits were lost in what authorities are calling one of the largest financial frauds in U.S. history.

Bankman-Fried, once a fixture on magazine covers and conference stages, now faces up to 50 years in prison when he is sentenced March 28 by U.S. District Judge Lewis Kaplan. Lawyers for Bankman-Fried have argued that he should receive a much lighter sentence.

The sentencing comes just over a year after Ray, who previously oversaw the liquidation of Enron, took control of FTX in a final attempt to stabilize the company. Ray said his team's first step is to invoke the bankruptcy court's automatic stay to prevent a “catastrophic collapse caused by Mr. Bankman-Fried's crimes” from engulfing the crypto ecosystem.

Describing Bankman-Fried as continuing “a life of delusion,” Ray cited private writings that revealed the crypto founder used “radical honesty on Twitter” to smear restructuring experts while claiming he had funding “that are ready to make customers healthy.”

“FTX, during its very short existence, was run by Mr. Bankman-Fried with hubris, arrogance and a complete lack of respect for the basic norms of the law, all the more inexcusable given his privileged upbringing,” Ray wrote.

Bankman-Fried's lead attorney did not immediately respond to a request for comment.

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