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Cryptocurrency News Articles

FTX CEO Slams Bankman-Fried's 'False and Reckless' Misrepresentations in Sentencing Hearing

Mar 22, 2024 at 11:03 pm

FTX CEO John J. Ray III has vehemently contested assertions made by embattled founder Sam Bankman-Fried in his sentencing memorandum, categorically rejecting claims that stakeholders suffered no harm in the ongoing legal saga. Ray asserts that "the harm to customers, lenders, and investors is zero" is "categorically, callously, and demonstrably false," highlighting that FTX debtors possessed only 105 bitcoins against customer entitlements of nearly 100,000 bitcoins, with account statements being incorrect due to "back door" borrowing by Alameda at Bankman-Fried's direction.

FTX CEO Slams Bankman-Fried's 'False and Reckless' Misrepresentations in Sentencing Hearing

FTX CEO John J. Ray III Rebuts Bankman-Fried's Misrepresentations in Scathing Response

In a strongly worded response to Sam Bankman-Fried's sentencing memorandum, FTX CEO John J. Ray III, acting on behalf of the firm's debtors, has vehemently contested the embattled founder's assertions regarding the extent of harm caused to stakeholders in the ongoing legal saga.

Bankman-Fried, facing charges of fraud and money laundering, had sought to downplay the magnitude of damage inflicted, claiming that the "harm to customers, lenders, and investors is zero" because "[t]he money was there—not lost."

Ray, however, has denounced these assertions as "categorically, callously, and demonstrably false." He emphasized that customers "still will never be in the same position they would have been had they not crossed paths with Mr. Bankman-Fried and his so-called brand of 'altruism'."

Ray's rejoinder meticulously dismantles Bankman-Fried's claims, including his assertion that FTX "was solvent at the time of the bankruptcy petition." Ray dismissed these statements as "reckless and false," accusing Bankman-Fried of disregarding important qualifications and caveats presented in previous hearings.

Discrepancy Between Asset Recovery and Losses

Central to Ray's argument is the stark discrepancy between the value of assets recovered and the losses suffered by victims. He notes that even in the most optimistic scenario, the Chapter 11 proceedings will not yield a full economic recovery for all creditors and non-insider equity investors, as if the fraud had never occurred.

This is particularly evident in the case of bitcoin holders, who would receive only $16,871 in cash for their bitcoin under the proposed repayments, significantly less than the current market value of $63,048 per bitcoin. This has understandably caused dissatisfaction among Bankman-Fried's victims.

Moreover, Ray argues that even if claims were recognized at the petition date, they would be inaccurate due to "back door" borrowing (theft) by Alameda at Bankman-Fried's direction. He reveals that FTX debtors did not possess on record the crypto that customers assumed was held in their accounts as of that date.

"Focusing on bitcoin, by way of example, when I took over as CEO, there were only 105 bitcoins left on the FTX.com exchange, against customer entitlements of nearly 100,000 bitcoins. Why were the bitcoins missing?" he questioned.

Unlikely Return to Stockholders

Ray also highlights Bankman-Fried's omission of the fact that his companies raised almost $2 billion by selling preferred stock and over $100 million by selling common stock to non-insiders. Even if non-governmental creditors are fully compensated, "any material return to stockholders is highly unlikely."

Ray's stance is supported by a detailed account of the arduous undertaking by FTX's restructuring team, under his leadership, to salvage the wreckage left by Bankman-Fried's alleged criminal enterprise. He emphasizes that the increase in asset value or the successful recovery of funds by professionals does not negate the necessity of the Chapter 11 proceedings.

"It is because of the Chapter 11 cases that we had assets which could rebound in value, and the court process that allowed the estate to chase wrongdoers that now enables the distribution of monies to customers," he wrote. "And make no mistake; customers, non-governmental creditors, governmental creditors, and non-insider stockholders have suffered and continue to suffer."

Bankman-Fried, found guilty on seven counts related to fraud and money laundering, faces sentencing on March 28. The government has recommended a 40-to-50-year prison sentence, while his legal team advocates for a reduction to approximately five to six and a half years. The government also seeks a substantial money judgment of over $11 billion and the forfeiture of Bankman-Fried's interests in specified properties.

This briefing was compiled using information from Coin Telegraph and the cited sources. The author has no securities or affiliations related to the organizations mentioned. This is not a recommendation to buy or sell securities. Always conduct thorough research and consult a professional before making investment decisions. The author does not hold any licenses.

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