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Major customers of the defunct FTX digital asset exchange will finally—no, really—start receiving their long-overdue repayments, while founder Sam Bankman-Fried (SBF) continues to hold out faint hope for a Trump pardon.
- FTX Debtors paying large creditors, attorneys
- SBF moved after prison media blitz
- SBF rewrites history to burnish conservative victim cred
- BitMEX founders pardoned, so why not SBF?
- SBF’s parents dodge legal bullet
Late last week, Bloomberg reported on a Delaware bankruptcy court proceeding in which FTX Debtors confirmed that on May 30, it will start distributing some $11.4 billion worth of recovered funds to FTX’s long-suffering ‘major’ creditors (those owed more than $50,000). Smaller creditors began receiving payments in February, 16 months after FTX collapsed in a scandal in late 2022.
Initially, it appeared that FTX creditors—regardless of the size of their claims—would receive only a fraction of their tokens’ fiat value. But the significant appreciation in fiat value of major tokens like BTC since the dark days of ‘crypto winter’ offered hope that creditors would receive the full value of their stranded holdings.
But FTX customers are only receiving the dollar value of their tokens at the time of FTX’s bankruptcy, meaning they miss out on all the value gains since November 2022. This isn’t sitting well with customers who wanted to receive ‘in-kind’ distributions rather than a frozen-in-time dollar conversion.
But the challenges facing FTX Debtors are legion, as detailed in court by bankruptcy attorney Andrew Dietderich, who said FTX Debtors had received “27 quintillion” claims against the assets it holds. While many of those claims are duplicates or fraudulent, creditors are entitled to 9% annual interest on the value of their claims. So, the longer this process drags out, the greater the value of these larger claims.
Further complicating the process, payouts to creditors based in certain countries—including Russia, China, Egypt, Nigeria, and Ukraine—were deemed ineligible, although FTX Debtors is said to be ‘reviewing’ its options to get funds to these creditors. Of these blocked jurisdictions, China held the largest slice of funds owed at 8%.
Also growing are the fees the bankruptcy attorneys are collecting. In February, Bloomberg reported that the total sum paid to law firms handling FTX’s bankruptcy process was $948 million, making it one of the largest such paydays in U.S. history. The record (nearly $6 billion) is held by the bankruptcy of Wall Street financial giant Lehman Brothers following the 2008 global economic meltdown.
The largest chunk ($306 million) of this near-billion-dollar legal windfall has gone to the firm of Alvarez and Marsal, which is advising FTX Debtors. The controversial Sullivan & Cromwell firm claimed $248.6 million, while firms representing FTX customers have received over $110 million. The consulting firm of John J. Ray III, the court-appointed CEO of FTX Debtors, has collected over $8 million.
SBF sees his prison shadow, faces 24 more years of winter
SBF, who was sentenced to 25 years in prison one year ago this week, was moved from his home at the Metropolitan Detention Center (MDC) in Brooklyn to a Federal Transfer Center (FTC) in Oklahoma on March 27. While the Federal Bureau of Prisons doesn’t offer explanations as to why it transfers prisoners, there are clues as to why SBF might be destined for a new permanent home.
After staying on the downlow following his sentence, SBF began something of a media tour following Donald Trump’s inauguration as U.S. president in January, starting with a February 20 audio interview with the New York Sun. Four days later, SBF tweeted for the first time in two years, disclosing that “being unemployed is a lot less relaxing than it looks.”
In early March, the day before SBF turned 33, SBF granted conservative podcaster Tucker Carlson an interview in which SBF appeared via video from his MDC cell. This appears to have been the final straw for federal officials, given that SBF hadn’t cleared the interview with MDC staff in advance as he was required to do. SBF was reportedly put in solitary confinement at MDC after the interview was made public.
Last May, SBF was briefly transferred to the FTC—the waystation for federal prisoners on the move—before being returned to MDC. At the time, it was thought the move might presage SBF being transferred to a federal prison in California in order to be closer to his parents, although this theory ultimately proved unfounded. His ‘forever’ home remains unclear at this point.
SBF rewrites history, sticks to ‘I wuz framed’ schtick
As for the content of SBF’s media blitz, he’s trying to rebrand himself as having been a closet conservative all along, presumably in the hope of securing a pardon from Trump. During the administration of Trump’s predecessor, SBF made conspicuous contributions to Democratic causes, although it was later revealed that he was contributing near-equal amounts to Republicans, just not promoting it.
Documents revealed during SBF’s trial showed his plan to ‘out’ himself as an equal opportunity opportunist. Among the items on a list SBF made for himself as his FTX empire crumbled around him was “Go on Tucker Carlsen [sic], come out as a republican.” SBF also suggested to himself that he “come out against the woke agenda” in a further bid to burnish his conservative bona fides.
SBF told the New York Sun that he originally considered his political leanings to be “center-left” but “that is not how I view myself anymore.” SBF claimed to have had his political epiphany before his FTX empire was exposed as a fraud, calling the Biden administration “incredibly destructive and difficult to work with.”
SBF claimed his Democratic donations were only intended to prevent the party from “becoming the party of Bernie Sanders” and that he’d secretly “been working with Republicans a lot more than had been previously thought.”
SBF also claimed that the jury at his trial had been told a “false” narrative regarding his fraudulent behavior, something SBF blamed on U.S. District Judge Lewis Kaplan for allowing the prosecution to introduce this narrative.
Kaplan also presided over the sexual assault trial brought against Trump by E. Jean Carroll. Trump, who was found guilty in that trial, made a number of disparaging remarks about Kaplan both during and after the proceedings, including calling Kaplan “abusive, rude, and obviously not impartial.” SBF told the Sun that both he and Trump “had a lot of frustrations with Judge Kaplan.”
Despite overwhelming evidence to the contrary, SBF told Carlson that he didn’t care what the U.S. court system had determined in arriving at his guilt, “I don’t think I was a criminal.”
SBF also threw a bone at Ryan Salame, the former FTX Digital Markets CEO who began serving his 90 months in prison last October. (In December, that sentence was reduced by 12 months for unclear reasons.)
Salame was the vessel through which FTX/SBF’s GOP donations were made, and SBF told Carlson he wasn’t sure whether the severity of Salame’s sentence was “because he is Republican, or is it because he refused to parrot the government’s lies at trial? Like, those are the only things I can imagine.” You know, besides all the fraud.
SBF seeks Trump pardon, but he doesn’t have the cards
SBF made sure to praise Trump’s embrace of all things crypto, but when asked by Carlson if SBF had any money left, he said “basically, no.” Which could pose a problem given Trump’s notoriously transactional approach to, well, everything.
Case in point: on March 28, Trump pardoned Trevor Milton, founder of electric vehicle startup Nikola, who’d been sentenced to four years in prison for fraudulently hyping his company’s abilities and causing investors to lose hundreds of millions of dollars.
Milton and his wife donated $1.8 million to a Trump campaign fund in the dying days of last year’s election. Last Friday, as word of the pardon spread, Trump told reporters that the only thing Milton did wrong was “he was one of the first people that supported a gentleman named Donald Trump for president.”
Friday also saw Trump pardon four former execs of the BitMEX digital asset exchange, including co-founders Arthur Hayes, Benjamin Delo and Samuel Reed, along with former biz-dev chief Gregory Dwyer.
BitMEX and its principals were found guilty of violating American anti-money laundering (AML) rules, with each co-founder paying $10 million to atone for their crimes. However, none of the accused saw the inside of a prison, instead receiving probationary sentences.
For what it’s worth, last December, Trump’s decentralized finance (DeFi) project World Liberty Financial (WLF) entered into a ‘strategic partnership’ with Ethena Labs, a company with significant backing from Hayes’ family office Maelstrom. WLF said it would integrate sUSDe—the staked version of Ethena’s USDe stablecoin—into the token lending platform that WLF is allegedly building.
In February, some token projects alleged that WLF was offering to make ‘reciprocal’ token purchases for individuals/entities that purchased millions of dollars’ worth of WLF’s governance token WLFI. All WLFI purchases generate significant fees for WLF, which antes up 75% of its revenue to a Trump-controlled entity.
But if SBF truly is broke—and can’t quash the lingering taint of his Democratic support—he doesn’t appear to have much leverage with which to secure Trump’s favor. However, that doesn’t mean his pardon chances are completely zero.
According to the ‘who will Trump pardon in first 100 days’ market on the Polymarket prediction betting site, SBF holds a 3% chance of securing that pardon by April 29. SBF’s chances have attracted over $1.5 million worth of wagers, higher than fellow pardon-seeker Roger Ver ($1.2 million, 5%) and far less than Binance founder Changpeng ‘CZ’ Zhao ($57,000, 5%).
The parent trap
In January, shortly after Trump’s inauguration, Bloomberg reported that SBF’s parents Joseph Bankman and Barbara Fried were interested in securing a presidential pardon for their son, although it was unclear whether the parents had directly contacted the White House regarding the matter.
While that pardon bid appears to be a major longshot, Bankman and Fried somehow convinced FTX Debtors to drop litigation that sought to reclaim the millions of dollars SBF provided his parents before FTX’s roof fell in. Since nearly all of SBF’s largesse was funded with FTX customer cash, it was felt that the parents had an obligation to return the sums or face legal blowback.
On February 24, FTX Debtors quietly alerted the Delaware bankruptcy court that it had reached a deal with Bankman and Fried to dismiss the suit without prejudice. That leaves open the possibility that the suit could be revived down the road should FTX Debtors deem it advisable, for example, if SBF’s parents don’t honor whatever their responsibilities—if any—might be under this agreement.
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