On-chain detective ZachXBT has publicly called out FTX founder Sam Bankman-Fried regarding the misrepresentation of the cryptocurrency exchange's recovery process. This statement follows a social media post by Bankman-Fried claiming "this is where the money went." Creditors of FTX are currently receiving repayments based on the asset values recorded at the time of the exchange's bankruptcy filing in November 2022. Consequently, investors have missed out on substantial potential gains from the significant price appreciation of Bitcoin and Solana over the past three years.
Customers Receive Dollarized Claims Instead of Cryptocurrency
ZachXBT directly responded to Bankman-Fried's assertion, clarifying that creditors are being paid according to the cryptocurrency prices as they were at the time of the FTX bankruptcy in November 2022. The on-chain investigator further highlighted that these payments are not based on current market prices. This discrepancy results in significant losses for users who held assets like Solana or Bitcoin, as they are not benefiting from the subsequent price increases. ZachXBT expressed that Bankman-Fried appears to have learned nothing from his time in prison and continues to disseminate misinformation.
The bankruptcy proceedings converted all customer cryptocurrency holdings into their respective dollar values as of November 11, 2022. For example, a customer who held one Bitcoin at that time received a claim valued at approximately $17,000, which was the market price of Bitcoin on the date the bankruptcy petition was filed. Bitcoin has since traded at considerably higher valuations, meaning these customers are forfeiting substantial appreciation. A similar situation applies to Solana holders, whose SOL tokens have experienced significant price gains since November 2022, yet creditors are receiving only the petition-date dollar value instead of the actual cryptocurrency.
Deputy Attorney General Todd Blanche addressed this issue in a memo titled "Ending Regulation By Prosecution." The document pointed out that following a prolonged period of price decline in the digital asset market during 2022, numerous companies that held investors' digital assets collapsed and subsequently entered bankruptcy.
ZachXBT Exposes Bankruptcy Recovery Reality
The on-chain sleuth explained that Sam Bankman-Fried is attempting to leverage the fact that nearly all FTX assets and investments have increased in value since the market's bottom in November 2022. At the time of its bankruptcy, the exchange was factually unable to pay its users. Bankman-Fried's recent social media activity appears to shift blame to the bankruptcy team rather than acknowledging his own role in the fraud.
According to disclosures from the bankruptcy estate, approximately 98% of creditors have already received 120% of their claims. After disbursing $8 billion for customer claims and $1 billion for legal fees, the estate still holds an estimated $8 billion in remaining assets.
FTX Exchange Collapse Revealed Massive Fraud Scheme
The downfall of FTX began on November 2, 2022, when crypto news outlet CoinDesk reported that Alameda Research, a trading firm also owned by Bankman-Fried, held a significant portion of its assets in FTX's native token. This revelation sparked widespread concern about the relationship between FTX and Alameda, leading to a surge in customer withdrawals. As withdrawals accelerated, Binance announced its intention to sell its FTT holdings, causing the token's value to plummet. By November 8, FTX was compelled to halt all customer withdrawals. Binance initially agreed to acquire the platform but rescinded its offer within 24 hours after uncovering the full extent of the fraud. On November 11, 2022, FTX and over 100 affiliated entities filed for bankruptcy, and Sam Bankman-Fried resigned as CEO.
Estate Identifies $5.5 Billion in Liquid Assets
To date, the FTX bankruptcy estate has identified approximately $5.5 billion in liquid assets. This includes $1.7 billion in cash and Bahamas real estate with a cost basis of $253 million. The estate has also identified investments valued at approximately $4.6 billion on its books, spread across more than 300 companies. These holdings include stakes in Stocktwits, PlayUpY, Genesis Digital Assets, Anthropic, Toss, 80 Acres Farms, MPL, Starkware, Chipper, Tripledot, Brinc, DoraHacks, Paxos, MystenLabs, and Dave.
The crisis experienced in November 2022 was primarily a liquidity crisis, characterized by a sudden shortage of cash. The exchange was on track to address this shortfall by the end of the month before external legal counsel took control. Equity investors who contributed roughly $1.95 billion to the exchange are now set to receive back $230 million. This represents a minimal fraction of their original investments, both in terms of actual payments and the potential going concern value of the company. While customers are receiving between 119% and 143% of their petition-date values, equity holders are absorbing nearly total losses.