Third parties could return FTX funds directly to customers: Law firm

More than 1 cardinal creditors of failed crypto speech FTX person been waiting to beryllium made full since earlier the firm’s bankruptcy filing connected Nov. 11, but according to 1 expert, recipients of donations and contributions whitethorn person a ineligible means of returning the funds straight to investors and customers. 

Louise Abbott, a spouse astatine United Kingdom-based steadfast Keystone Law, told Cointelegraph it was “extremely unlikely” FTX would person a ineligible limb to basal connected successful its demands for the voluntary instrumentality of governmental run donations, grants, and different contributions the steadfast made anterior to its bankruptcy. However, galore individuals and organizations — apt the effect of nationalist scrutiny — person already returned oregon pledged to return an estimated $6.6 million to FTX, a fraction of the millions the institution sent successful little tumultuous times.

“In law, the investors’ claims volition beryllium against the FTX trading entity, and/or those liable for the fraud,” said Abbott. “It does not, arsenic substance of wide course, widen to claims against those who donated funds, unless 1 tin successful immoderate mode beryllium proved that they were implicit successful the fraud, which is doubtful.”

Among the funds not returned were a reported $5.2 cardinal from U.S. President Joe Biden’s 2020 statesmanlike campaign, though galore lawmakers person announced they already sent backmost contributions to FTX amid the firm’s collapse. According to Abbott, these refunds were little apt to beryllium astir responding to imaginable ineligible action, but firms and individuals distancing themselves from the scandal, and “wanting to beryllium seen to bash the close thing.”

The bulk of contributions are extracurricular of FTX’s bankruptcy proceedings, presently successful the aboriginal stages and not guaranteed to marque each investors oregon users whole. Though erstwhile CEO Sam Bankman-Fried has suggested connected much than 1 juncture that helium planned “to bash close by customers,” helium mostly has nary relation successful bankruptcy court, and alternatively faces charges from the U.S. Justice Department, Securities and Exchange Commission, and Commodity Futures Trading Commission.

Gurbir Grewal: We commend our instrumentality enforcement partners for securing the apprehension of Sam Bankman-Fried connected national transgression charges. The SEC has authorized abstracted charges relating to his violations of securities laws, to beryllium filed publically time successful SDNY. https://t.co/ON0LgY4mf4

— U.S. Securities and Exchange Commission (@SECGov) December 13, 2022

Abbott said it was imaginable that 3rd parties who had received FTX donations could beryllium compelled to instrumentality them straight to users, arsenic investigations revealed the steadfast utilized lawsuit assets to money investments done Alameda Research — a apt usurpation of the platform’s presumption and conditions. According to the ineligible expert, this would mean users could assertion successful tribunal that assets “remained their spot astatine each times” and could beryllium treated separately from bankruptcy proceedings:

“Such assets caught wrong these presumption are not assets belonging to the company, and truthful the Liquidator has nary ineligible close to collate them arsenic institution assets. Those are assets belonging to the respective investors.”

Related: 'You tin perpetrate fraud successful shorts and T-shirts successful the sun,' says SDNY lawyer connected SBF indictment

Bankman-Fried was handed implicit from authorities successful The Bahamas into U.S. custody connected Dec. 21, having been detained successful the land federation since Dec. 12. Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang person besides been deed with charges related to defrauding investors, but Ellison has struck a deal with the U.S. Attorney’s Office for the Southern District of New York successful speech for the implicit disclosure of definite accusation and documents, perchance successful an effort to bolster the lawsuit against Bankman-Fried.