‘Why Are Bitcoins Disappearing?’: FTX Crash Leader Slams SBF’s ‘Delusional’ Defense

In a serious victim impact statement, FTX's CEO accused the crypto company's disgraced founder, Sam Bankman-Fried, of “blatantly, callously and falsely” claiming client losses without showing any remorse for the billions allegedly stolen in the biggest fraud in history. .

A statement from John J. Ray III, an experienced corporate restructuring expert who handled FTX's bankruptcy, directly contradicted Bankman-Fried's claim that “the harm to customers, creditors and investors is zero” and that the money was “not lost” because they were FTX entities. Dissolved when the company was dissolved in November.

“Mr. Bankman-Fried quoted 14 lines from the Jan. 31, 2024, bankruptcy court hearing and three news reports of the hearing,” Ray wrote in a statement filed Friday before Mr. Bankman-Fried's sentencing hearing in federal court in New York. It ignores pages and pages of useful comments, criteria, and caveats.”

Ray wrote, “The damage was extensive, and there was no regret. Effective altruism, at least as lived by Samuel Bankman-Fried, was false.”

Bankman-Fried, who developed his image as a social conscience while turning FTX into a crypto behemoth, was indicted in November on fraud and conspiracy charges. Prosecutors allege in the indictment that he orchestrated a years-long scheme to use clients' money to fund risky bets, luxury real estate purchases and political donations.

Ray said that while “a very large group of individuals” have worked diligently over the past 16 months to recover funds and stabilize FTX's operations, Bankman-Fried's victims may not be fully satisfied, noting that “customers, non-government lenders, government lenders and non-inside shareholders have suffered and continue to suffer.

Bankuman-Fried's contention that FTX is liquid was contradicted by the “backdoor” lending by Alameda Research's sister business, which meant customer accounts of cryptocurrency holdings were “inaccurate,” Ray said. With user claims of nearly 100,000 bitcoins, when Banman-Fried stepped down, there were only 105 bitcoins left on the FTX exchange.

“Why did the bitcoins disappear? The jury concluded beyond a reasonable doubt that Mr. Banman-Fried stole them and converted them into something else,” Ray wrote. “As a result, they are not available to repay the victims in kind.”

Expected recoveries are “by no means certain” and are highly dependent on “voluntary compliance” with more than $9 billion in government fines, as well as settlements with U.S. agencies and victories in future legal battles, he said.

The FTX implosion sent shockwaves through the crypto industry last November, with Bitcoin below $16,000. At least $8 billion in customer deposits were lost in what authorities called one of the largest financial frauds in American history.

The event, once featured on magazine covers and conference forums, faces up to 50 years in prison when Banman-Fried is sentenced on March 28 by U.S. District Judge Louis Kaplan.

The ruling comes a year after Ray, who previously oversaw Enron's liquidation, took control of FTX in a last-ditch bid to stabilize the company. Ray said the group's first step was to invoke the bankruptcy court's automatic stay to stop the “catastrophic fallout caused by Mr. Bankman-Fried's crimes” from flooding the crypto ecosystem.

Ray Bankman-Fried continued to live a “deceitful life” and used “radical honesty on Twitter” to discredit restructuring experts, citing personal writings of the crypto founder, who said he was “ready to make clients whole.”

“FTX's short existence has been driven by Mr. Banman-Fried's hubris, arrogance and complete disregard for the basic rules of the law, which is even more unforgiving than his child's upbringing,” Ray wrote.

An attorney for Bankman-Fried did not immediately respond to a request for comment.