If the IRS doesn’t overrule it, FTX’s clients might recover nearly all of their $16 billion loss in a startling turn of events as Sam Bankman-Fried’s preferred cryptocurrency DOUBLES in value in just one month.
- After Bankman-Fried, 31, was found guilty on Thursday of perpetrating one of the biggest financial scams in US history, his victims may be able to recover nearly all of the $16 billion they lost when FTX failed in November 2022.
- The IRS, however, may move quickly to seize everything as it alleges FTX owes $44 billion, which may exceed customer recovery monies.
Unless the IRS intervenes to confiscate the money instead, the victims of Sam Bankman-Fried’s financial crimes may be able to recover nearly all of the $16 billion that was lost when his cryptocurrency exchange, FTX, crashed.
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After it was discovered that Bankman-Fried, 31, had fraudulently channeled customer payments from FTX to his hedge fund Alameda Research and to pay for a lavish lifestyle, he was found guilty on Thursday of one of the biggest financial frauds in US history.
But those who lost out greatly have been fighting for a year to recover the stolen goods, while the former billionaire could spend up to 115 years in prison for his actions in and before November 2022.
The now-defunct company has had an unexpected spike in value following the discovery of previously undiscovered assets, as well as an appreciation of others. Notably, Bankman-Fried’s previous favored cryptocurrency, Solana, has witnessed a notable surge.
John J. Ray III, a bankruptcy lawyer, is currently in charge of the exchange. He revealed this month that FTX clients can anticipate receiving a payout of more than 90% of the ‘distributable worth’ of the assets of the defunct company.
The IRS asserts that FTX still owes $44 billion, so it’s unclear if the government agency would seize the money that’s in arrears before customers can get their losses back.
It’s uncertain how much money will be recovered in the end, but Ray has stated that smaller investors who had funds on FTX’s US and international exchanges will receive the most of the proceeds, according to Forbes.
According to the site, venture capitalists like Temasek and Sequoia Capital may suffer large financial losses under the current distribution scheme, since individuals who withdrew more than $250,000 in the nine days before to FTX’s bankruptcy filing will only receive a 15 percent salary cut.
Former FTX lieutenants, such co-founder Gary Wang and former general counsel Ryne Miller, who testified against Bankman-Fried during his prosecution, are among those who will not receive a single penny.
Larger players might not be able to make up all of their losses under Ray’s plan, while smaller users who attempted to withdraw $250,000 or less might fare better.
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Customers may be able to recover their money in part because of the recent increase in value of the assets that FTX still owns.
Specifically, the value of Solana, Bankman-Fried’s preferred cryptocurrency, which he extensively invested in during the height of his influence, has increased dramatically in recent weeks.
The collapse of FTX dealt a serious blow to cryptocurrencies. Before the collapse at the end of the year, the exchange had over 65 million’sols’ valued about $2 billion; after the crash, the same coins were only worth $650 million.
However, since the beginning of September, Solana’s value has more than doubled, rising from a low of $17.60 to a recent high of $39.49, CoinDesk reports. This is due to the fact that the bankruptcy estate’s total value has increased by about $1 billion in the last two weeks.
Due to the somewhat comparable trend observed in a number of other significant assets, FTX’s cryptocurrency holdings alone have increased in value from $1.7 billion on August 31 to $2.6 billion as of right now.
Recovery attempts have also benefited by FTX investments in other profitable businesses. For example, $500 million was invested in the AI startup Anthropic, which is currently valued between $3 billion and $4.5 billion, according to The Information.
In addition to the stock appreciation, additional assets that were previously unknown to be owned by FTX have reportedly come to light during the bankruptcy examination.
In addition, the bankrupt corporation still owns the famed Bahamas penthouse where Bankman-Fried and his inner circle led the company into bankruptcy, together with almost $900 million in financial assets housed in brokerage accounts.
According to reports, FTX owns the penthouse and the nearby condos, which are valued at $199 million.
Still, the IRS’s own actions could undermine the encouraging numbers about Bankman-Fried’s money return.
The United States government has brought 45 lawsuits against FTX and its affiliates, claiming the corporation is still owed $44 billion.
The IRS may utilize its power to take precedence, according to Zach Rosenberg, an attorney and principal at Rosehill Legal, a firm focusing on cryptocurrency, who told Forbes that the federal agency might also have first claim on the money.
“Because the IRS’s claim is administrative, it would take precedence over unsecured claims by default,” he stated.
However, since they never gave up legal rights to the assets they placed on FTX, it is unclear if the majority of clients have property interests or unsecured claims, which is the focus of a case brought against the estate.
He did, however, note that the IRS’s $44 billion estimate might be greatly overstated.
“According to the information at hand, it seems the IRS assessed the estate for jeopardy and assessed as much as it could at every level of the organization,” he said.
“That $44 billion figure almost certainly contains a significant amount of duplication.”
The expert went on to say that he believes the IRS may try to negotiate a lower payment.
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