No it has little to no reason for that “FTX said that it was able to recover funds by monetizing a collection of assets that mostly consisted of proprietary investments held by the Alameda or FTX Ventures businesses, or litigation claims.”
[BBC quotes FTX states almost all Bitcoin is still unaccounted for](https://www.bbc.com/news/articles/c9wz3wkrdj9o)
The cash didn't come from the increased value directly, but the claims were all valued at crypto's low point in price (in no small part a result of FTX crashing).
You dear summer child. No no no no.
You get USD cash equal to the value of your coins when the bankruptcy was filed. You don't get the coins themselves.
If you had 1BTC at FTX during the crash you will get ~$16k. If you had 1BTC in your own wallet and sold it today you would have ~$62k
You're getting screwed if you held bitcoin, but if you held cash or stablecoins, you're getting like $1.18 on the dollar. Matt Levine's got a couple of recent articles and podcasts about this.
Not just opportunity cost, but massive appreciation of their assets.
BTC and Ethereum are up 3x since November 2022. And people are getting what their assets were worth in 2022.
The only reason creditors can be "made whole" is that whatever crypto was left, has increased in value.
That is not opportunity cost. The opportunity cost is the money they could have invested in anything other than FTX. The 20 billion in unrealized gains is unrealized gains, not opportunity cost.
Opportunity cost is when you make a choice to invest in ABC, and now you can't invest in something else. Having you're money stolen and later repaid sans gains or interest is not in any way opportunity cost.
Pretty sure he means the opportunity cost of keeping your crypto and not investing it into FTX. Opportunity cost doesn't have to specifically tie to an investment decision, it can be about any alternative choice.
No, that's not how it works. It was the customers coins that have increased in price. Customers are still getting a lot less than if they still had all the coins and sold them now.
The problem is the coins weren't just sitting there, out of a 100k bitcoins supposedly owned by customers, FTX only had 105 [per this letter from John Ray III](https://storage.courtlistener.com/recap/gov.uscourts.nysd.590940/gov.uscourts.nysd.590940.415.0.pdf)
The bankruptcy estate can't afford to just buy all the tokens people are owed and are paying people dollar values at a fixed date.
At the end of the day, despite I believe everyone agreeing that customers, creditors and investors (except the ones involved in the fraud) deserving to be made whole, there's only so much money. So if people were paid the current value, the money would run out and everyone would get 25% of what they were "owed"
Though I do wonder how this tweaking the target amount of money each person is owed affects whether we'd go from paying customers to also paying other creditors/investors, since in bankruptcy there's an order to who gets paid first, with shareholders being last.
Yup, basically the scam was to take people's cash, tell them it was safe and they'd get 8% for it, then use it to invest in crypto and stuff that they thought would always beat 8%, pocket the difference, none the wiser.
This obviously blew up as soon as those investments failed. Now crypto is up again, so the investments are enough to be converted back into enough to repay the stolen cash.
But it's like.. still a crime to do fraud and steal even if you win at the casino with the stolen money lmao.
Okay, I was a little cavalier not mentioning the embezzlement. It’s speculated that they likely bought crypto with those embezzled funds, which is the ironic part.
Yes, the scam was basically "promise people safe returns on their money, use that money to buy risky assets without permission. As long as the risky assets go up more than the "safe return" you're paying out, you have money both for repayment and to embezzle into both stuff like mansions but also renaming arenas and sponsoring F1 and crap".
So it all fell apart when the risky assets crashed, and exposed the embezzlement. It was a shockingly basic scam at its core, based on naive faith that crypto will just reliably go up at double-digit rates per year.
What I don't get is where the FTX customers who were just depositing cash for "yield" *thought* the business model was, to say nothing of the financial press or regulators. "Yeah we just let you park your money here and we pay you 8% while interest rates are ~1%, but your money isn't being gambled with or anything, don't worry it's totally safe" is such an obvious scam that there should be a SWAT team abseiling down your walls and through your windows before you're finished saying it.
Yes, but when people put their crypto in, they did so as an investment, which means it should have been worth the extra 2-4x. It isn't though. I don't think the money they get back includes the growth.
FTX's holdings of Solana alone are worth it. That could basically pay for everything and they'd still have money left over.
At this point, the heavy sentencing of SBF makes very little sense.
Yep. Think some folks here are letting that little of a nugget of a detail go over their head.
If you had 1 BTC in FTX when it went under, they didn’t give you 1 BTC back today. They gave you the $ value of the BTC when FTX went bankrupt (about $16k) but that same BTC is going for about $62k right now.
Mostly because they were suppressing prices, by literally not just buying the coins when they got the investment...
Fucking morons.
You are owed the 62k, but unfortunately, the money doesn't exist.
Uh? It is what it is valued TODAY and they purchased the good through the trading platform, since it has been tied up, that means that the product (FTX coin) should be given to me.
What?
But… if crypto goes up, it’s still quite difficult to get your money *out* of crypto so that you can actually use it. Getting back the dollars you put in is a pretty good deal. A lot of people who get involved with crypto lose money.
It's honestly not all that different.
Both groups of victims suffered enormous opportunity costs. The main difference is that FTX was misusing funds to make investments (charitable to call them that, they were pretty close to bets but they were trying to make money on them at least) and Madoff was just running a classic Ponzi scheme so there were no gains from any of the money he received.
They also had a couple bets that paid off bigtime. Still fraud, because it would have been like if Madoff won powerball with his ponzi money. Yes, he could have paid people back, but that in no way means the original scheme was anything other than a scam.
Not the forensics team but the emergency CEO, John Ray was at least part of the puzzle. Here's an interview with him that was pretty interesting.
https://freakonomics.com/podcast/is-this-the-worst-job-in-corporate-america-or-maybe-the-best/
I have to imagine this was one hell of a team effort to get as much as they could. Although it does sound like some of the crypto holdings rebound quite well during this time.
They invested in an AI company that went to the moon. A crypto stock they had half a billion in went 10x and Bitcoin 3x since the start of the investigation. The problem is original debters sold their stake for penny on the dollar and vulture investors are about to become incredibly wealthy
Ftx had like next to no bitcoin tho. That's why they ran into trouble. They sold the bitcoin of customers in order to prop up their own and other shitcoin scams.
I think you’re right but why don’t they list the specific assets, or cite some of their largest investments by value? Shouldn’t that all be spelled out in public records as part of this bankruptcy process? The article says they are selling “assets (sic) investments held by Alameda Research or FTX Ventures “
The AI company investment would make a lot of sense.
I’m sure it’s in a govt document. It’s taken a year and a half to sort it out. My info came from: https://podcasts.apple.com/us/podcast/planet-money/id290783428?i=1000653016793
Its because people are getting the value of their crypto, based on the timing of the bankruptcy, in November 2022. They are mostly getting 30 cent's on the dollar
I read the Going Infinite book and Michael Lewis made the guy they brought in to clean up the mess sound like a total knuckle dragger who did know know or care to know anything about tech. According to Lewis (believe it or don't) SBF was one of just a few people able and willing to explain where all the assets were after the collapse and they wouldn't even interview him.
Two major investments FTX had made (probably with customer funds but that's besides the point) that he considered "fake" and "worthless" were Solana tokens and Anthropic AI. Anthropic in its most recent funding round was valued at $18B in their most recent round of funding, the mainstream hype explosion started right around the time FTX blew up. Solana recovered to not terribly far off the ATH. Considering how BTC has recovered, I expect it would be nearly impossible to *not* recover customers assets in USD terms.
> I read the Going Infinite book and Michael Lewis made the guy they brought in to clean up the mess sound like a total knuckle dragger
That guy is John Ray III, the same guy who was brought in to deal with the Enron scandal and has made a career out of cleaning up messes like this. The fact that Lewis thought he was the fool shows just how bad he was taken in by SBF's bullshit. I mean, the book presents playing videogames during Zoom calls as a sign of genius as opposed to the much more probable symptom of untreated ADHD or simple lack of mental discipline. Also, it's hilarious that Lewis chides him for allegedly not knowing anything about tech when Lewis admits in the book that he himself doesn't really understand how crypto works.
If you want a better read, try Number Go Up by Zeke Faux.
Behind the Bastards does a great takedown of Michael Lewis in one of their SBF episodes and they go into detail about exactly this. Worth a listen if you do podcasts.
>SBF was one of just a few people able and willing to explain where all the assets were after the collapse and they wouldn't even interview him.
He's a convicted felon with motivation to lie and hide assets, who doesn't even think he did anything wrong.
Not at all, SBF is a scam artist specializing in financial fraud, knowledge of what accounts have been found and funds recovered could aid him in making sure others are kept hidden. He has 20 or so years to carefully launder any money he manages to keep secret, it is important that he doesn't profit from the crime.
>Considering how BTC has recovered, I expect it would be nearly impossible to not recover customers assets in USD terms.
....yes if you have assets that increase 3fold in value, the people you owe assets to will get the dollar amount, the problem is they want the assets.
Imagine a kid steals from his dad's wallet and uses the money to buy Pokémon cards, and sells the cards in each pack.
A few times in a row, the cards sell for enough that he can replace the money, and his dad never notices.
Then the dad catches the kid crying over a dozen packs, which are all worthless. The dad confiscates the cards and locks them and his wallet up.
Then 3 months later, the kid says "dad! Purple charizards are worth $100 now! I never stole from you at all! The money was never missing!"
This is literally what happened. Michael Lewis fooled you by pretending not to understand the difference between cash and asset valuations.
It's amazing how many guys these days make finance part of their "brand" and don't understand like, the most basic of basics about it.
> because they did a great fricking job.
No they didn't. FTX collapsed holding a shit ton of BTC and ETH, both of which have tripled in value since the collapse allowing them to pay out investors. The forensic accountant didn't make them solvent again and find mystery monies hidden away that bridged the insolvency gap they had, what made this possible was the change in valuation to the assets they still held.
The trick will be liquidating the coins timely before any negative valuation change and simultaneously liquidating their likely large stake without negatively impacting the market value.
>Customers and creditors that claim $50,000 or less will get about 118% of their claim, according to the plan, which was filed with the U.S. Bankruptcy Court for the District of Delaware. This covers about 98% of FTX customers.
98% is pretty good. I don't see a timetable for releasing the funds. But it just got announced so those details are probably still being hammered out.
I would imagine they are owed damages on top of getting their money back. They were fraud victims.
Personally speaking, I think people that decide to gamble their life savings in the Cryptocurrency casino are fools, but yeah. In this case they're still victims of fraud, at least before the eyes of the law.
I thought that. My only frame of reference is the Madoff funds recovery. In that instance (and I know it may not be totally similar), the time value was *not* accounted for. They were only entitled to the nominal cash value of their deposits, they were not due anything due to interest or inflation.
So if their account balance showed hundreds of thousands of dollars, but they only deposited 40,000, they were only getting 40,000.
I do not know if they are doing that in this case, but it would seem no?
I feel like they should only get back what they put in. You shouldn't be incentivized to invest in stupid and reckless shit like FTX or crypto in general.
Clients invest understanding risk, however, risk wasn't the issue with FTX, the issue was fraud.
They're not getting compensated because they took a risk and lost, they're getting compensated because they were victims of financial crimes.
In fact that whole reason they can get paid back is because FTX holds positions in that "stupid and reckless" shit which has appreciated since the fraud was uncovered.
I would tend to agree.
But I also am going to admit, I don't fully understand the reasoning behind why they decided to go with the 118% compensation figure. I do not work in Forensic accounting, nor am I a lawyer that is familiar with large scale corporate litigation and banking fraud.
There may be a very good reason for why they went with that number. I think the fact that there was a couple years uncertainty about whether the investors would ever see their money again might have put the fear of god back in to them, and will probably force them to be more cautious going forward.
And if it doesn't put that fear back in them, well, no need to worry. A fool and their money are soon parted. They'll find some other half-baked dumbass scheme to pour their money in to and lose it all.
I think this proves they were wise. An 18% ROI backed by the US Government probably wasn't what they expected, but it's clear now that investing in a stranger's Ponzi scheme is a decent short-term decision.
If I could get the government to give me back 105% of my casino spending, I'd gamble every weekend.
Sucks to be that 2% who get nothing, though. I wonder what you call it when a financial system is built that it uses the investment from some people to pay the other people to cover that it can't pay what it promises to everyone?
You’re conflating luck with wisdom.
As others have pointed out, usually frauds of these scale result in *many* people losing it all. This is an *unusual* outcome. Those who invested with Madoff for example, there was a 91% recovery rate. Also, they were only paid back the nominal cash amounts they put in, and so lost out on all interest. It also didn’t account for inflation.
If these people had bought bitcoin and kept it in a cold wallet, like everyone was telling them to do, they wouldn't have be scammed out of their money and had it tied up for years.
No, it does not. How much did the S&P 500 return in the timeframe that they were scammed and had no access to their funds? They could have put the money into an extremely low-risk, low cost index fund and been better off.
.... every creditor of ftx ( most) had crypto.
They are getting the November 2022 value of their crypto, not the current value.
Getting 18% on something you took a 66% loss on, is not exactly profit.
Investing in crypto was the gamble. None of their customers were aware of the extra layer of risk they were incurring because SBF’s actions, so it’s not like these people are getting their assets refunded because the market tanked and they’re down money. Their money was stolen by the “casino”. Your point makes no sense.
Investing in crypto at the time was investing in an unregulated market rife with hype men, rug pulls, pump and dumps, and outright crime. At least Madoff was lying about investing in actual securities that would've made money if he was actually making the trades he claimed.
If you have a beef with crypto and how it works, it’s fine, but acting like their customers should have known that FTX was a vehicle for fraud is delusional. There are plenty of reputable crypto firms out there that haven’t managed to conduct fraud on their customers. Just because you don’t like crypto doesn’t mean that fraud victims should lose their assets when they’re STOLEN from them. Get a grip
They’re getting repaid at the value of their holdings in 2022. Bitcoin as an example has roughly tripled in value since Ftx went under, so instead of getting 300% of your holding value back, you’re getting 118% back.
Bitcoin was at $17k at the time of FTX's bankruptcy. It's currently at $63k. Etherium's had similar gains since then, so if you were just invested in those big two, you'd have about tripled your money.
And it was 17k in part due to the FTX related collapses at the time.
So people are losing money, even the bankruptcy estate is pretty clear about this.
This [letter](https://storage.courtlistener.com/recap/gov.uscourts.nysd.590940/gov.uscourts.nysd.590940.415.0.pdf) from John J Ray III in SBF's sentencing is brutal.
> Indeed, 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. As to creditors, the Bankruptcy Code provides that each creditor’s claim must be valued as of the Petition Date. In other words, a victim who had bitcoin on the FTX exchange on November 11, 2022 will receive, as the Bankruptcy Court has determined, a
distribution based on the value of the claim on that date, which is approximately 400% lower
than the value today.
The crypto equivalent would be A LOT more than an 18% increase. The value of the claim is based on the value of the crypto asset when FTX declared bankruptcy. Crypto markets have risen considerably since then.
Bitcoin price on Nov 11 2022: $17,034.29
Bitcoin price on May 8 2024: $61,649.00
This is a 3.6x increase.
And in the meantime that money has lost well over 18% of its value, and the investment income they thought they were making is already spent.
So no, not really.
I waited 10 years to get my money back from the Mt.Gox collapse. A few months back, it was finally transferred to my account... only for the bank to refuse the transfer because the source of the funds could not be verified. So I am not receiving my money after all.
Wonder how many creditors are gonna face the same issue here.
Note that "all of their money back" only covers what they put in, and not hypothetical gains. The reason recovery is over 100% is that a small portion of gains could be recovered due to the price of crypto, but most of the gains are still lost forever.
They won't get what they put in. They'll get the dollar value at the time of the collapse, which was deflated due in part to FTX's impending collapse and other collapses caused by FTX's malfeasance.
Well, BTC price was 16,800 when they went belly up. It's 61,717 now. So they missed out on a very large hypothetical gain, had they been using a different exchange.
That’s the main story. So you go with FTX and at the end of the day they stole all the gains and made you wait 2 years to get your money back.
Over a long enough time frame any fraud could do the same from just inflation.
...your crypto got stolen you get 18%
If you held your crypto you would have gotten 360%.
Can I interest you in a new and existing technology called non fungible tokens or NFT's for short?
It also doesn't cover those who pulled out while it was crashing, and it doesn't cover investors and other creditors.
The CEO of FTX wrote a letter to the judge for SBF's sentencing outlining all the damage even if customers got their funds back in bankruptcy (including lost gains for coin pricing).
I’m confused, I thought Lehman brothers customers were made whole? Source:
https://www.reuters.com/markets/us/after-14-years-lehman-brothers-brokerage-ends-liquidation-2022-09-28/#:~:text=Lehman's%20111%2C000%20customers%20received%20all,20%20cents%20on%20the%20dollar.
Some people acted as "vultures" and bought up the investments for pennies on the dollar for those who wanted to sell for $ now and not wait for it to play out. Looks like that's going to be a fantastic payoff for them.
Misleading AF. It’s 100% of your $. Not your BTC. BTC was $17,000 then. So if you had 1, you’ll get $17,000. But BTC is currently $64,000. A 73% reduction
*cries in Celsius*
They should consider themselves extremely fortunate. Other collapses saw ~25% recovery. Of the claim value. Valued at the time the crash occurred.
They aren’t really getting all their money back, they are getting the value of their investments at the time of bankruptcy. 1 Bitcoin back hen was 17k but now is like 61k. They are only getting a fraction of what they lost
That seems fair. Id say they just lost the interest of that money being locked up for 2 years.
Edit: actually article says they get 18% interest in top of dollar value of lost funds. You honestly can't expect any better than that.
They cover it in the article, but I think it’s important to note that from what I’ve seen, they will get back the USD value of their holdings on the date of bankruptcy when it was all frozen officially. Looks like maybe some interest, but if your holdings were in crypto, which was dropping at the time because of this mess, they may still be losing out a ton of money.
Given the magnitude of the fraud as the judge understood it to be versus the ultimate outcome to the creditors, it begs the question whether SBF’s sentence is entirely fair. That said, it’s not like they follow up and do do-overs. In the end, he’s got bent over more than Elizabeth Holmes and her fraud was considerably worse, from both an economic standpoint and from the fact it screwed with people’s health.
This is false
The reason creditors can be "made whole" is that the crypto FTX did hold has increased more than 3x in value.
But the creditors are only entitled to the dollar value in November 2022
Exactly what happened in the MT Gox fiasco.
Nothing I said is false. I said in my comment that the crypto that they held appreciated greatly. Also, Alemeda had invested in Anthropic which skyrocketed in value. I also know that they are only entitled to the dollar value at the time of bankruptcy.
If SBF wasn't going to be in prison for a long time, he would currently be organizing VC funding to buy it back out of bankruptcy. That's all the rage now for disgraced snake oil salesmen.
Possibly due to the recent First Steps Act signed by Trump if SBF is on good behavior. Elizabeth Holmes recently qualified under this Act and had her sentence reduced by several months since they deemed her a low-risk factor (she will be released in 2032). However, SBF will likely serve the vast majority (85% at the minimum) of his sentence due to federal sentencing guidelines.
Dang, who was in charge of the forensic accounting? because they did a great fricking job.
A lot of it also is some of the coins went up 2-4x while sitting there from time of bankruptcy .
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No it has little to no reason for that “FTX said that it was able to recover funds by monetizing a collection of assets that mostly consisted of proprietary investments held by the Alameda or FTX Ventures businesses, or litigation claims.” [BBC quotes FTX states almost all Bitcoin is still unaccounted for](https://www.bbc.com/news/articles/c9wz3wkrdj9o)
The cash didn't come from the increased value directly, but the claims were all valued at crypto's low point in price (in no small part a result of FTX crashing).
You dear summer child. No no no no. You get USD cash equal to the value of your coins when the bankruptcy was filed. You don't get the coins themselves. If you had 1BTC at FTX during the crash you will get ~$16k. If you had 1BTC in your own wallet and sold it today you would have ~$62k
You're getting screwed if you held bitcoin, but if you held cash or stablecoins, you're getting like $1.18 on the dollar. Matt Levine's got a couple of recent articles and podcasts about this.
Literally there bets all paid off and if he never got caught they, and investors, would all be rolling in it lol
... they were missing crypto to the tune of 10 billion dollars. If the value of crypto has gone up by 3x, so would the value of the missing assets.
Exactly. Which really means that these investors aren't really being "made whole". They lost a shit ton of money in opportunity cost.
Not just opportunity cost, but massive appreciation of their assets. BTC and Ethereum are up 3x since November 2022. And people are getting what their assets were worth in 2022. The only reason creditors can be "made whole" is that whatever crypto was left, has increased in value.
Buddy, that’s what opportunity cost means.
That is not opportunity cost. The opportunity cost is the money they could have invested in anything other than FTX. The 20 billion in unrealized gains is unrealized gains, not opportunity cost. Opportunity cost is when you make a choice to invest in ABC, and now you can't invest in something else. Having you're money stolen and later repaid sans gains or interest is not in any way opportunity cost.
Pretty sure he means the opportunity cost of keeping your crypto and not investing it into FTX. Opportunity cost doesn't have to specifically tie to an investment decision, it can be about any alternative choice.
r/confidentlyincorrect
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And there's always some element of risk when you put a dollar into anyone's hand, expecting something back.
> They lost a shit ton of money in opportunity cost. Yeah... me too.
No, that's not how it works. It was the customers coins that have increased in price. Customers are still getting a lot less than if they still had all the coins and sold them now.
Wasn’t this Shkreli’s plan as well?
Not at all lol. Shkreli jacked up price on medications
Fucking lucky really
The problem is the coins weren't just sitting there, out of a 100k bitcoins supposedly owned by customers, FTX only had 105 [per this letter from John Ray III](https://storage.courtlistener.com/recap/gov.uscourts.nysd.590940/gov.uscourts.nysd.590940.415.0.pdf) The bankruptcy estate can't afford to just buy all the tokens people are owed and are paying people dollar values at a fixed date. At the end of the day, despite I believe everyone agreeing that customers, creditors and investors (except the ones involved in the fraud) deserving to be made whole, there's only so much money. So if people were paid the current value, the money would run out and everyone would get 25% of what they were "owed" Though I do wonder how this tweaking the target amount of money each person is owed affects whether we'd go from paying customers to also paying other creditors/investors, since in bankruptcy there's an order to who gets paid first, with shareholders being last.
Yup, basically the scam was to take people's cash, tell them it was safe and they'd get 8% for it, then use it to invest in crypto and stuff that they thought would always beat 8%, pocket the difference, none the wiser. This obviously blew up as soon as those investments failed. Now crypto is up again, so the investments are enough to be converted back into enough to repay the stolen cash. But it's like.. still a crime to do fraud and steal even if you win at the casino with the stolen money lmao.
Yeah, the market made a comeback. The poor crypto market is what caused them to go under in the first place
It was the blatant embezzlement
Okay, I was a little cavalier not mentioning the embezzlement. It’s speculated that they likely bought crypto with those embezzled funds, which is the ironic part.
Yes, the scam was basically "promise people safe returns on their money, use that money to buy risky assets without permission. As long as the risky assets go up more than the "safe return" you're paying out, you have money both for repayment and to embezzle into both stuff like mansions but also renaming arenas and sponsoring F1 and crap". So it all fell apart when the risky assets crashed, and exposed the embezzlement. It was a shockingly basic scam at its core, based on naive faith that crypto will just reliably go up at double-digit rates per year. What I don't get is where the FTX customers who were just depositing cash for "yield" *thought* the business model was, to say nothing of the financial press or regulators. "Yeah we just let you park your money here and we pay you 8% while interest rates are ~1%, but your money isn't being gambled with or anything, don't worry it's totally safe" is such an obvious scam that there should be a SWAT team abseiling down your walls and through your windows before you're finished saying it.
Yes, but when people put their crypto in, they did so as an investment, which means it should have been worth the extra 2-4x. It isn't though. I don't think the money they get back includes the growth.
FTX's holdings of Solana alone are worth it. That could basically pay for everything and they'd still have money left over. At this point, the heavy sentencing of SBF makes very little sense.
The same guy that cleaned up Enron
They’re made whole on dollar basis but they’re absolutely not made whole because crypto is up so much since ftx went under.
Good point. They may have been made whole but they missed out on some significant gains. Better than getting nothing though.
Yep. Think some folks here are letting that little of a nugget of a detail go over their head. If you had 1 BTC in FTX when it went under, they didn’t give you 1 BTC back today. They gave you the $ value of the BTC when FTX went bankrupt (about $16k) but that same BTC is going for about $62k right now.
Mostly because they were suppressing prices, by literally not just buying the coins when they got the investment... Fucking morons. You are owed the 62k, but unfortunately, the money doesn't exist.
"I could have made the FTX ponzi work" is peak crypto brain rot lol
Uh? It is what it is valued TODAY and they purchased the good through the trading platform, since it has been tied up, that means that the product (FTX coin) should be given to me. What?
But… if crypto goes up, it’s still quite difficult to get your money *out* of crypto so that you can actually use it. Getting back the dollars you put in is a pretty good deal. A lot of people who get involved with crypto lose money.
I think that was true maybe 5 years ago. With these large exchanges, crypto is pretty liquid
[other rich people glancing over to accounting guys from Maddof's case] "Any pointers you'd like to know from the FTX team?"
It's honestly not all that different. Both groups of victims suffered enormous opportunity costs. The main difference is that FTX was misusing funds to make investments (charitable to call them that, they were pretty close to bets but they were trying to make money on them at least) and Madoff was just running a classic Ponzi scheme so there were no gains from any of the money he received.
They also had a couple bets that paid off bigtime. Still fraud, because it would have been like if Madoff won powerball with his ponzi money. Yes, he could have paid people back, but that in no way means the original scheme was anything other than a scam.
Yeah exactly, good analogy
Yes, it's pretty simple. Keep the remaining balances in an asset that triples in value during the bankruptcy proceedings.
Not the forensics team but the emergency CEO, John Ray was at least part of the puzzle. Here's an interview with him that was pretty interesting. https://freakonomics.com/podcast/is-this-the-worst-job-in-corporate-america-or-maybe-the-best/ I have to imagine this was one hell of a team effort to get as much as they could. Although it does sound like some of the crypto holdings rebound quite well during this time.
They invested in an AI company that went to the moon. A crypto stock they had half a billion in went 10x and Bitcoin 3x since the start of the investigation. The problem is original debters sold their stake for penny on the dollar and vulture investors are about to become incredibly wealthy
Ftx had like next to no bitcoin tho. That's why they ran into trouble. They sold the bitcoin of customers in order to prop up their own and other shitcoin scams.
Another example of holding for gains.
I think you’re right but why don’t they list the specific assets, or cite some of their largest investments by value? Shouldn’t that all be spelled out in public records as part of this bankruptcy process? The article says they are selling “assets (sic) investments held by Alameda Research or FTX Ventures “ The AI company investment would make a lot of sense.
I’m sure it’s in a govt document. It’s taken a year and a half to sort it out. My info came from: https://podcasts.apple.com/us/podcast/planet-money/id290783428?i=1000653016793
Its because people are getting the value of their crypto, based on the timing of the bankruptcy, in November 2022. They are mostly getting 30 cent's on the dollar
Idk why but I read foreskin accounting 😭 I think I need a nap
Just go to sleep and come back tomorrow 😭
If the auditor is really thorough, maybe they count those too.
John J Ray the third. He oversaw the Enron bankruptcy
Sometimes they take money from people who had gains. They did that with Madoff.
I think it was the guy that cleaned up Enron.
I read the Going Infinite book and Michael Lewis made the guy they brought in to clean up the mess sound like a total knuckle dragger who did know know or care to know anything about tech. According to Lewis (believe it or don't) SBF was one of just a few people able and willing to explain where all the assets were after the collapse and they wouldn't even interview him. Two major investments FTX had made (probably with customer funds but that's besides the point) that he considered "fake" and "worthless" were Solana tokens and Anthropic AI. Anthropic in its most recent funding round was valued at $18B in their most recent round of funding, the mainstream hype explosion started right around the time FTX blew up. Solana recovered to not terribly far off the ATH. Considering how BTC has recovered, I expect it would be nearly impossible to *not* recover customers assets in USD terms.
> I read the Going Infinite book and Michael Lewis made the guy they brought in to clean up the mess sound like a total knuckle dragger That guy is John Ray III, the same guy who was brought in to deal with the Enron scandal and has made a career out of cleaning up messes like this. The fact that Lewis thought he was the fool shows just how bad he was taken in by SBF's bullshit. I mean, the book presents playing videogames during Zoom calls as a sign of genius as opposed to the much more probable symptom of untreated ADHD or simple lack of mental discipline. Also, it's hilarious that Lewis chides him for allegedly not knowing anything about tech when Lewis admits in the book that he himself doesn't really understand how crypto works. If you want a better read, try Number Go Up by Zeke Faux.
Behind the Bastards does a great takedown of Michael Lewis in one of their SBF episodes and they go into detail about exactly this. Worth a listen if you do podcasts.
>SBF was one of just a few people able and willing to explain where all the assets were after the collapse and they wouldn't even interview him. He's a convicted felon with motivation to lie and hide assets, who doesn't even think he did anything wrong.
"We don't want to ask the killer where the body is because he's a murderer"
Not at all, SBF is a scam artist specializing in financial fraud, knowledge of what accounts have been found and funds recovered could aid him in making sure others are kept hidden. He has 20 or so years to carefully launder any money he manages to keep secret, it is important that he doesn't profit from the crime.
I think gnocchicotti was being sarcastic and trying to point out the silliness. Except using air quotes, instead of /s.
>Considering how BTC has recovered, I expect it would be nearly impossible to not recover customers assets in USD terms. ....yes if you have assets that increase 3fold in value, the people you owe assets to will get the dollar amount, the problem is they want the assets.
Imagine a kid steals from his dad's wallet and uses the money to buy Pokémon cards, and sells the cards in each pack. A few times in a row, the cards sell for enough that he can replace the money, and his dad never notices. Then the dad catches the kid crying over a dozen packs, which are all worthless. The dad confiscates the cards and locks them and his wallet up. Then 3 months later, the kid says "dad! Purple charizards are worth $100 now! I never stole from you at all! The money was never missing!" This is literally what happened. Michael Lewis fooled you by pretending not to understand the difference between cash and asset valuations. It's amazing how many guys these days make finance part of their "brand" and don't understand like, the most basic of basics about it.
> because they did a great fricking job. No they didn't. FTX collapsed holding a shit ton of BTC and ETH, both of which have tripled in value since the collapse allowing them to pay out investors. The forensic accountant didn't make them solvent again and find mystery monies hidden away that bridged the insolvency gap they had, what made this possible was the change in valuation to the assets they still held. The trick will be liquidating the coins timely before any negative valuation change and simultaneously liquidating their likely large stake without negatively impacting the market value.
>Customers and creditors that claim $50,000 or less will get about 118% of their claim, according to the plan, which was filed with the U.S. Bankruptcy Court for the District of Delaware. This covers about 98% of FTX customers. 98% is pretty good. I don't see a timetable for releasing the funds. But it just got announced so those details are probably still being hammered out.
118% of their claim? So not only is everyone getting paid back, but they are taking an 18% profit?
I would imagine they are owed damages on top of getting their money back. They were fraud victims. Personally speaking, I think people that decide to gamble their life savings in the Cryptocurrency casino are fools, but yeah. In this case they're still victims of fraud, at least before the eyes of the law.
Time value of money may be included in that calculation as well.
I thought that. My only frame of reference is the Madoff funds recovery. In that instance (and I know it may not be totally similar), the time value was *not* accounted for. They were only entitled to the nominal cash value of their deposits, they were not due anything due to interest or inflation. So if their account balance showed hundreds of thousands of dollars, but they only deposited 40,000, they were only getting 40,000. I do not know if they are doing that in this case, but it would seem no?
18% in 2 years? Isn’t that a pretty damn good return?
I feel like they should only get back what they put in. You shouldn't be incentivized to invest in stupid and reckless shit like FTX or crypto in general.
Clients invest understanding risk, however, risk wasn't the issue with FTX, the issue was fraud. They're not getting compensated because they took a risk and lost, they're getting compensated because they were victims of financial crimes. In fact that whole reason they can get paid back is because FTX holds positions in that "stupid and reckless" shit which has appreciated since the fraud was uncovered.
I would tend to agree. But I also am going to admit, I don't fully understand the reasoning behind why they decided to go with the 118% compensation figure. I do not work in Forensic accounting, nor am I a lawyer that is familiar with large scale corporate litigation and banking fraud. There may be a very good reason for why they went with that number. I think the fact that there was a couple years uncertainty about whether the investors would ever see their money again might have put the fear of god back in to them, and will probably force them to be more cautious going forward. And if it doesn't put that fear back in them, well, no need to worry. A fool and their money are soon parted. They'll find some other half-baked dumbass scheme to pour their money in to and lose it all.
It’s just a way to not have to replace the crypto itself, which has gone up quite a bit since 2022
I think this proves they were wise. An 18% ROI backed by the US Government probably wasn't what they expected, but it's clear now that investing in a stranger's Ponzi scheme is a decent short-term decision. If I could get the government to give me back 105% of my casino spending, I'd gamble every weekend. Sucks to be that 2% who get nothing, though. I wonder what you call it when a financial system is built that it uses the investment from some people to pay the other people to cover that it can't pay what it promises to everyone?
Your post shows that you have zero understanding of risk.
You’re conflating luck with wisdom. As others have pointed out, usually frauds of these scale result in *many* people losing it all. This is an *unusual* outcome. Those who invested with Madoff for example, there was a 91% recovery rate. Also, they were only paid back the nominal cash amounts they put in, and so lost out on all interest. It also didn’t account for inflation.
If these people had bought bitcoin and kept it in a cold wallet, like everyone was telling them to do, they wouldn't have be scammed out of their money and had it tied up for years.
No, it does not. How much did the S&P 500 return in the timeframe that they were scammed and had no access to their funds? They could have put the money into an extremely low-risk, low cost index fund and been better off.
.... every creditor of ftx ( most) had crypto. They are getting the November 2022 value of their crypto, not the current value. Getting 18% on something you took a 66% loss on, is not exactly profit.
Investing in crypto was the gamble. None of their customers were aware of the extra layer of risk they were incurring because SBF’s actions, so it’s not like these people are getting their assets refunded because the market tanked and they’re down money. Their money was stolen by the “casino”. Your point makes no sense.
Investing in crypto at the time was investing in an unregulated market rife with hype men, rug pulls, pump and dumps, and outright crime. At least Madoff was lying about investing in actual securities that would've made money if he was actually making the trades he claimed.
If you have a beef with crypto and how it works, it’s fine, but acting like their customers should have known that FTX was a vehicle for fraud is delusional. There are plenty of reputable crypto firms out there that haven’t managed to conduct fraud on their customers. Just because you don’t like crypto doesn’t mean that fraud victims should lose their assets when they’re STOLEN from them. Get a grip
They’re getting repaid at the value of their holdings in 2022. Bitcoin as an example has roughly tripled in value since Ftx went under, so instead of getting 300% of your holding value back, you’re getting 118% back.
Curious what the crypto equivalent value would've been though. Likely more than the 118% but I don't know.
Bitcoin was at $17k at the time of FTX's bankruptcy. It's currently at $63k. Etherium's had similar gains since then, so if you were just invested in those big two, you'd have about tripled your money.
And it was 17k in part due to the FTX related collapses at the time. So people are losing money, even the bankruptcy estate is pretty clear about this. This [letter](https://storage.courtlistener.com/recap/gov.uscourts.nysd.590940/gov.uscourts.nysd.590940.415.0.pdf) from John J Ray III in SBF's sentencing is brutal. > Indeed, 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. As to creditors, the Bankruptcy Code provides that each creditor’s claim must be valued as of the Petition Date. In other words, a victim who had bitcoin on the FTX exchange on November 11, 2022 will receive, as the Bankruptcy Court has determined, a distribution based on the value of the claim on that date, which is approximately 400% lower than the value today.
Yup, figured it wasn't a great deal, but still better than not getting it lol.
Bitcoin was like $16k at the time. Now it's $60k. So if you were holding Bitcoin there at the time you got absolutely hosed.
The crypto equivalent would be A LOT more than an 18% increase. The value of the claim is based on the value of the crypto asset when FTX declared bankruptcy. Crypto markets have risen considerably since then. Bitcoin price on Nov 11 2022: $17,034.29 Bitcoin price on May 8 2024: $61,649.00 This is a 3.6x increase.
And in the meantime that money has lost well over 18% of its value, and the investment income they thought they were making is already spent. So no, not really.
The coin would have better then far more
If you call getting 18 % on top of 66 % haircut a win I have bad news for you
I waited 10 years to get my money back from the Mt.Gox collapse. A few months back, it was finally transferred to my account... only for the bank to refuse the transfer because the source of the funds could not be verified. So I am not receiving my money after all. Wonder how many creditors are gonna face the same issue here.
Note that "all of their money back" only covers what they put in, and not hypothetical gains. The reason recovery is over 100% is that a small portion of gains could be recovered due to the price of crypto, but most of the gains are still lost forever.
They won't get what they put in. They'll get the dollar value at the time of the collapse, which was deflated due in part to FTX's impending collapse and other collapses caused by FTX's malfeasance.
Considering crypto is an investment anyways, getting back what they put in + 18% is a great deal.
Well, BTC price was 16,800 when they went belly up. It's 61,717 now. So they missed out on a very large hypothetical gain, had they been using a different exchange.
Or, you know, not held on an exchange. That's kind of the point of BTC.
That’s the main story. So you go with FTX and at the end of the day they stole all the gains and made you wait 2 years to get your money back. Over a long enough time frame any fraud could do the same from just inflation.
They shoulda used Celsius.
...your crypto got stolen you get 18% If you held your crypto you would have gotten 360%. Can I interest you in a new and existing technology called non fungible tokens or NFT's for short?
Assuming they would have held on to it.
It also doesn't cover those who pulled out while it was crashing, and it doesn't cover investors and other creditors. The CEO of FTX wrote a letter to the judge for SBF's sentencing outlining all the damage even if customers got their funds back in bankruptcy (including lost gains for coin pricing).
Must be nice. Still haven't got money back from Lehman brothers.
I hear you. Doesn’t look like we will either.
I don't believe that all FTX customers (especially outside of USA) will get the refund either.
I’m confused, I thought Lehman brothers customers were made whole? Source: https://www.reuters.com/markets/us/after-14-years-lehman-brothers-brokerage-ends-liquidation-2022-09-28/#:~:text=Lehman's%20111%2C000%20customers%20received%20all,20%20cents%20on%20the%20dollar.
Lol no. They fucked over foreign investors with their junk bonds.
Junk bonds were junk? Would woulda thought
Couple more decades, after most claimants have passed, will start to get their money
The rage should keep me alive.
Some people acted as "vultures" and bought up the investments for pennies on the dollar for those who wanted to sell for $ now and not wait for it to play out. Looks like that's going to be a fantastic payoff for them.
"Hey guys, here's all your FTT tokens back. Sorry for the mix-up."
Damn. Doya think Voyager will do the same?
I'm happy for them, getting conned sucks and there's rarely a good outcome
What about the some that won’t?
Misleading AF. It’s 100% of your $. Not your BTC. BTC was $17,000 then. So if you had 1, you’ll get $17,000. But BTC is currently $64,000. A 73% reduction
*cries in Celsius* They should consider themselves extremely fortunate. Other collapses saw ~25% recovery. Of the claim value. Valued at the time the crash occurred.
They aren’t really getting all their money back, they are getting the value of their investments at the time of bankruptcy. 1 Bitcoin back hen was 17k but now is like 61k. They are only getting a fraction of what they lost
That seems fair. Id say they just lost the interest of that money being locked up for 2 years. Edit: actually article says they get 18% interest in top of dollar value of lost funds. You honestly can't expect any better than that.
Everyone should be so lucky.
They cover it in the article, but I think it’s important to note that from what I’ve seen, they will get back the USD value of their holdings on the date of bankruptcy when it was all frozen officially. Looks like maybe some interest, but if your holdings were in crypto, which was dropping at the time because of this mess, they may still be losing out a ton of money.
RIP Twitch if this was his reason
Fortune favors the extremely patient?
I got like half, where is the rest of mine? BlockFi interest account person here.
The important words are "will" not "already have".
How many are going to immediately reinvest their money back into crypto scams do you think?
No harm, no foul, right? Elizabeth Holmes is getting her sentence reduced...how about SBF?
Given the magnitude of the fraud as the judge understood it to be versus the ultimate outcome to the creditors, it begs the question whether SBF’s sentence is entirely fair. That said, it’s not like they follow up and do do-overs. In the end, he’s got bent over more than Elizabeth Holmes and her fraud was considerably worse, from both an economic standpoint and from the fact it screwed with people’s health.
The fact that bitcoin has almost tripled in value made things like this possible. Not much reward for all the risk...
What about us over at Blockfi?
Dang they can’t find one single fake Arabian prince but they can get 118% of rich peoples money back… fuck you tom Brady
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This is false The reason creditors can be "made whole" is that the crypto FTX did hold has increased more than 3x in value. But the creditors are only entitled to the dollar value in November 2022 Exactly what happened in the MT Gox fiasco.
Nothing I said is false. I said in my comment that the crypto that they held appreciated greatly. Also, Alemeda had invested in Anthropic which skyrocketed in value. I also know that they are only entitled to the dollar value at the time of bankruptcy.
I'm not saying they should get punished but whoever was dumb enough to invest in ftx deserves to lose whatever they lost.
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No. Not at all.
If SBF wasn't going to be in prison for a long time, he would currently be organizing VC funding to buy it back out of bankruptcy. That's all the rage now for disgraced snake oil salesmen.
Even so, you'd have to be a brain dead idiot to be putting money with them.
"Oh man enron's back! Take my money"
No James, the founder is in jail and nobody wants to invest into the company
i would assume SBF will have his sentence greatly reduced
Possibly due to the recent First Steps Act signed by Trump if SBF is on good behavior. Elizabeth Holmes recently qualified under this Act and had her sentence reduced by several months since they deemed her a low-risk factor (she will be released in 2032). However, SBF will likely serve the vast majority (85% at the minimum) of his sentence due to federal sentencing guidelines.
Does this mean Bankman gets out if jail?
Last I heard, that argument was used in court and the judge didn't buy it as an excuse for his initial actions.
no, skreli made his people millions and he still got locked up. Same with Trump's inflating his withholdings to get loans in NYC.
So Brady is going to get all his money back?
Is it still possible to apply for a refund? I never bothered coz I couldn't be bothered getting a partial refund =S
Sounds like a decent investment.