Implications of the FTX and Alameda Situation for Cryptocurrency and Regulation

[FP91G]

The U.S. government's claim for $24 billion in unpaid taxes from FTX has only one source – taking cash away from its victims, the bankrupt crypto exchange said in a court filing Sunday.
The filing disputed the amount claimed and also said there are no other sources of cash. Unless a judge rejects the Internal Revenue Service's demand, the victims of the FTX fraud will not get any meaningful recovery. The case is scheduled to be heard later Tuesday.
"This Alice in Wonderland argument has no support in the law," the filing said. "There is simply no basis to support the IRS’s meritless claims that the Debtors owe tax in an amount that is orders of magnitude greater than any income the Debtors ever earned and that would effectively prevent most of FTX’s creditors – themselves victims of fraud – from obtaining any meaningful recovery."
https://www.coindesk.com/policy/2023/12/12/ftx-disputes-irss-alice-in-wonderland-tax-claim/

[zasad@]

The U.S. government's claim for $24 billion in unpaid taxes from FTX has only one source – taking cash away from its victims, the bankrupt crypto exchange said in a court filing Sunday.
The filing disputed the amount claimed and also said there are no other sources of cash. Unless a judge rejects the Internal Revenue Service's demand, the victims of the FTX fraud will not get any meaningful recovery. The case is scheduled to be heard later Tuesday.
"This Alice in Wonderland argument has no support in the law," the filing said. "There is simply no basis to support the IRS’s meritless claims that the Debtors owe tax in an amount that is orders of magnitude greater than any income the Debtors ever earned and that would effectively prevent most of FTX’s creditors – themselves victims of fraud – from obtaining any meaningful recovery."
https://www.coindesk.com/policy/2023/12/12/ftx-disputes-irss-alice-in-wonderland-tax-claim/

Initially, the amount was greater; 24 billion is a reduced amount.
I can only comment on this news in a way that makes it clear to everyone.
The US government tells the FTX exchange: “Let the creditors continue to wait for their payments. They invested and therefore assessed their risks, so they will remain unpaid. Pay the money to the US budget, it is needed there more.”

[safar1980]

FTX loses $53K every hour on ‘bankruptcy fees,’ latest filings show
In the three months ending Oct. 31, defunct crypto exchange FTX has been burning through approximately $53,000 every hour on bankruptcy lawyers and advisers, the latest round of compensation filings show.

Court filings from Dec. 5 to Dec. 16 show that the bankruptcy lawyers have charged at least $118.1 million between Aug. 1 and Oct. 31. Over the 92 days, this amounts to $1.3 million per day or $53,300 per hour. 

The largest bill came from the management consulting firm Alvarez and Marshall, which charged $35.8 million for its services for the three months.

[zasad@]

https://finance.yahoo.com/news/ftx-files-plan-end-bankruptcy-021449836.html
"The reorganization plan left some of the most important questions unanswered, including whether FTX will restart its defunct crypto exchange, how the company will estimate the value of some digital tokens and how much creditors can expect to get back.

Next year, the plan will be sent to creditors for a vote — likely with key details added — before it goes to US Bankruptcy Judge John Dorsey for final approval. The major creditor and customer groups that have been involved in the Chapter 11 case have agreed to the broad outlines of the plan.

The payout plan calls for billions of dollars to be distributed as cash after much of the firm’s cryptocurrencies have been liquidated.

Last month, FTX founder Sam Bankman-Fried was convicted of orchestrating a massive fraud that led to the collapse of his FTX exchange."

___
1. The US Treasury claims a large share of the budget
https://bitcointalk.org/index.php?topic=5420536.msg63323427#msg63323427

2. Another interesting point is that it is not yet clear at what rates the money will be returned to creditors, but most likely not at the rate at which they invested. And it is unclear how much will remain after tax penalties.

[zasad@]

https://www.theblock.co/post/290002/ftx-to-sell-next-lot-of-locked-solana-tokens-at-auction
FTX to auction next lot of locked Solana tokens: Mike Cagney
"The next sale of FTX’s stockpile of locked Solana will take the form of an auction, likely because of high demand from buyers.
Following the estate's sale of $1.9 billion worth of Solana tokens to industry firms such as Galaxy Digital and Pantera, the next sale will be an auction, according to Figure CEO Mike Cagney. Exact details of the sale have not yet been revealed and FTX did not immediately respond to a request for comment. "

[zasad@]

https://www.bloomberg.com/news/articles/2024-05-07/ftx-has-billions-more-than-needed-to-repay-bankruptcy-victims
FTX Has Billions More Than Needed to Pay Bankruptcy Victims
"Crypto customers to get interest on what FTX owes them
Bankrupt firm updates plan to divide cash among creditors
Cryptocurrency exchange FTX has amassed billions of dollars more than it needs to cover what customers lost in its November 2022 collapse, setting them up to receive full recoveries, plus interest, a rare outcome in US bankruptcy proceedings.

Lower-ranking creditors typically receive just pennies on the dollar for their holdings, but FTX benefitted from a strong rally in cryptocurrencies including Solana, a token heavily backed by convicted fraudster and FTX founder Sam Bankman-Fried. The company has also sold dozens of other assets, including various venture-capital projects like a stake in the artificial-intelligence company Anthropic."

____
Why is SBF in prison?
It was already clear that not everyone would receive a refund.

[zasad@]

https://www.theblock.co/post/305687/ftx-and-cftc-agree-to-12-7-billion-settlement-following-months-of-negotiations
"The two have been negotiating over the past few months, according to a court document filed on July 12 in the U.S. Bankruptcy Court for the District of Delaware.
As part of the settlement, the CFTC agreed it would receive nothing as long as FTX complies with its reorganization plan. Therefore FTX will pay up to $12.7 billion to creditors, subject to available funds."

[zasad@]

https://www.crypto-news-flash.com/ftx-to-redistribute-16b-to-creditors-in-q4-2024-crypto-market-awaits-liquidity-surge/

FTX to Redistribute $16B to Creditors in Q4 2024—Crypto Market Awaits Liquidity Surge
"FTX is set to redistribute $16 billion to creditors in Q4 2024, which could significantly impact the crypto market by introducing a major liquidity influx.
A 50 bps rate cut by the U.S. Federal Reserve and similar moves by other central banks have increased liquidity."

[safar1980]

Former FTX exec Nishad Singh avoids prison time after cooperating with authorities in crypto exchange collapse: reports

Nishad Singh, FTX's former engineering director was given no prison time after pleading guilty to criminal charges, including fraud following the collapse of the crypto exchange, according to multiple reports.

Judge Lewis Kaplan of New York sentenced Singh to time served and three years of supervised release, according to reporting from Inner City Press.

Singh's lawyers previously asked for the New York court to not impose jail time and said his "role was far more limited than any other defendant." Singh pleaded guilty in February 2023 to six criminal charges, including fraud and conspiracy to commit money laundering.

FTX collapsed in November 2022 after filing for bankruptcy following a liquidity crisis and fraud allegations. Alameda Research, a trading firm with close ties to FTX, also fell.

Former FTX CEO Sam Bankman-Fried was sentenced to nearly 25 years in prison on March 28 and ordered to pay back up to $11 billion in investor and lender losses. He was found guilty in November 2023 of seven criminal counts, including two counts each of wire fraud and conspiracy to commit wire fraud, as well as several counts of conspiracy to commit securities and commodities fraud, among other criminal acts.

Singh cooperated with authorities in testifying against his former boss, Bankman-Fried, in October 2023.

[crwth]

~snip

This shows how much people value the information they have and ensure that the people doing the right thing get the best thing. Without his cooperation, I think it wouldn't be as effective with the legal actions that SBF received. At least we know the truth, but I hope all the customers get everything back.

[zasad@]

This shows how much people value the information they have and ensure that the people doing the right thing get the best thing. Without his cooperation, I think it wouldn't be as effective with the legal actions that SBF received. At least we know the truth, but I hope all the customers get everything back.

The FTX case is getting pretty boring to a lot of people. The U.S. justice system says whoever turns in all the partners first will be a witness. The damage to investors is more than 10 billion dollars and one man who had a problem with medical drugs is in jail. It's a circus, not justice.

[zasad@]

Long live the most humane court in the world

https://cointelegraph.com/news/former-ftx-exec-ryan-salame-prison-sentence-reduced-1-year
Former FTX executive Ryan Salame’s prison sentence reduced by 1 year

"Former FTX Digital Markets co-CEO Ryan Salame’s prison sentence was reduced by one year, with his current release date scheduled for March 2031, United States Bureau of Prison records show.

Salame pleaded guilty in September 2023 to conspiracy to operate an unlicensed money-transmitting business and engaging in campaign finance fraud.

The former FTX executive was sentenced to 7.5 years in prison on May 28, putting his original release date around April 2032, after which he would be subject to three years of supervised release.

Cointelegraph reached out to the FCI Cumberland correctional facility for comment on Salame’s reduced sentence but was unable to obtain a response by the time of publication. The reasons for Salame’s reduced prison time are unclear."


https://www.msn.com/en-us/money/financial-regulation/ftx-execs-including-caroline-ellison-cut-time-off-their-prison-sentences/ar-AA1wwK7W

"Former FTX (FTT-USD) executives Ryan Salame and Caroline Ellison, convicted for their roles in the multibillion-dollar crypto fraud orchestrated by Sam Bankman-Fried, have had their prison sentences reduced.

Salame, former head of failed cryptocurrency exchange FTX's Bahamian subsidiary, started his sentence in October. He was sentenced in May to 7.5 years in federal prison, though his release date is currently more than a year earlier at March 1, 2031, according to the Federal Bureau of Prisons website.

Ellison, the former CEO of FTX's trading arm, Alameda Research, was sentenced to two years behind bars with three years probation for her role in the fraud that led to the collapse of FTX. A key witness against Bankman-Fried, Ellison's current release date, July 20, 2026, is about three months earlier than her initial release date.

Bankman-Fried, meanwhile, does not have a scheduled release date on the prisons site. Recall in March when he was sentenced to 25 years in prison."

[Z-tight]

Cointelegraph reached out to the FCI Cumberland correctional facility for comment on Salame’s reduced sentence but was unable to obtain a response by the time of publication. The reasons for Salame’s reduced prison time are unclear."

It will be interesting to know what happened and why the prison sentence was reduced, so many people, including the victimss of the collapsed exchange felt that the sentencing was light, including that given to sbf and now to reduce it. When sbf was sentenced, a lot of people predicted that he won't spend 25 years in prison, they might eventually turn out to be right later.

[zasad@]

https://www.bloomberg.com/news/articles/2025-01-30/sam-bankman-fried-s-parents-explore-seeking-trump-pardon-for-son
Sam Bankman-Fried’s Parents Explore Seeking Trump Pardon for Son
"They’ve met with lawyers and other figures in Trump’s orbit
FTX co-founder was sentenced to 25 years for fraud last year

The parents of FTX co-founder Sam Bankman-Fried are exploring ways to secure a pardon for the onetime crypto billionaire from President Donald Trump, according to a person familiar with the matter.

Stanford Law School Professors Joseph Bankman and Barbara Fried had meetings in recent weeks with lawyers and other figures considered to be in Trump’s orbit about clemency for their 32-year-old son, who was sentenced to 25 years in prison for fraud, the person said. It’s unclear if outreach has been made to the White House."

[NotFuzzyWarm]

Not surprised in the least.
Personally I hope he and his cohorts rot in prison as a lesson to others: One does NOT use other peoples funds as a personal piggy-bank.

[zasad@]

Not surprised in the least.
Personally I hope he and his cohorts rot in prison as a lesson to others: One does NOT use other peoples funds as a personal piggy-bank.

Don't worry about it. Ellison, Bankman-Fried and the others are hired clowns. They've accomplished their mission, they'll spend a little time in jail and go free.

Well, who would trust a drug addict and small-time speculator with billions of dollars?

Personally I don't see Bankman-Fried going free anytime soon, there has to be social justice. Maybe traditionally after the end of his term Trump will give him a pardon.

[Z-tight]

The parents of FTX co-founder Sam Bankman-Fried are exploring ways to secure a pardon for the onetime crypto billionaire from President Donald Trump, according to a person familiar with the matter.

Lol, Donald Trump pardons Ross and everyone who has been convicted suddenly thinks they can get the same fate, i don't think this would be granted, he didn't get a crazy sentence like Ross did. 25 years is befitting for the crimes he committed and he should spend all of it in prison; i'm sure Trump knows he cannot pardon everyone.

[zasad@]

The parents of FTX co-founder Sam Bankman-Fried are exploring ways to secure a pardon for the onetime crypto billionaire from President Donald Trump, according to a person familiar with the matter.

Lol, Donald Trump pardons Ross and everyone who has been convicted suddenly thinks they can get the same fate, i don't think this would be granted, he didn't get a crazy sentence like Ross did. 25 years is befitting for the crimes he committed and he should spend all of it in prison; i'm sure Trump knows he cannot pardon everyone.

Ross was in the drug trade and Bankman-Fried the clown was in financial manipulation. But with the current price increases, Bankman-Fried's company can pay off all the debts and losses incurred.

I think Sam should go to jail, but not for 25 years.

[zasad@]

https://www.motherjones.com/politics/2025/10/ftx-sam-bankman-fried-crypto-bankruptcy-sullivan-cromwell-fraud/

Sam Bankman-Fried and the Multibillion-Dollar Drama Over FTX’s Ruins

"Sam Bankman-Fried nervously sheds his dark brown prison jumpsuit to reveal athletic shorts and a loose-fitting gray T-shirt.

“There’s this extremely dumb cat and mouse game where, for reasons no one has ever bothered to articulate, between the hours of like 6 a.m. and 3 p.m. on weekdays, the only clothing we’re allowed to wear is the one-piece prison jumpsuit,” he explains, settling into a plastic chair in a cinder-block room. “So I’m just gonna keep an ear out. And if I hear noise, I’ll sort of scramble to put the jumper back on.”

Bankman-Fried, universally known as SBF, still seems to feel some kind of imperative to skirt rules he deems illogical or contradictory. Depending on who you ask, that might be what landed him in prison, serving 25 years for orchestrating one of the biggest financial crimes in history. “You know, I never defrauded anyone,” he says. It’s a sentiment he expresses again and again, despite the findings of a jury: FTX, the cryptocurrency exchange he founded in 2019, was never bankrupt. The billions he was found guilty of stealing, never gone.

It’s February 2025, and our reporters are on a call with SBF, one of more than a half-dozen interviews we conducted with him over the past year. How we ended up face to face with the fallen crypto mogul was happenstance. A chance introduction to Joe Bankman and Barbara Fried, the esteemed Stanford legal scholars who are Bankman-Fried’s parents, eventually yielded a meeting with SBF. Bankman (who advised FTX) and Fried are now part of his legal team and are preparing to appeal his conviction. They, like their son, want to rebut the public narrative of the wayward “Crypto King” who scammed investors out of $8 billion."

[zasad@]

https://www.msn.com/en-us/money/companies/sbf-faces-skeptical-judges-at-appeal-of-ftx-fraud-verdict/ar-AA1PMwZg
SBF Faces Skeptical Judges at Appeal of FTX Fraud Verdict

(Bloomberg) -- Sam Bankman-Fried’s bid to reverse his fraud conviction and 25-year prison sentence ran into a trio of appeals court judges who appeared skeptical of arguments that he didn’t get a fair trial.

Bankman-Fried’s legal team argued that the trial judge wrongly stopped them from telling jurors that there was plenty of money to repay investors despite the collapse of his crypto currency exchange in 2022 or that he relied on the advice of lawyers. Decisions by US District Judge Lewis Kaplan sharply limited their ability to counter prosecution arguments on those topics, his lawyers said.

“The defense was cut off at the knees by the judge’s rulings,” Bankman-Fried’s lawyer, Alexandra Shapiro, said at the hearing at the 2nd US Circuit Court of Appeals in New York Tuesday.

A jury in Manhattan found Bankman-Fried, 33, guilty in 2023 of seven criminal counts including fraud and conspiracy at his popular cryptocurrency exchange. The trial was closely watched by the industry and by the broader public, making him the perceived face of greed and mismanagement in the market for digital currencies.

But the three-judge panel appeared skeptical in their questioning of Shapiro, including when she implored them to “look at the full picture” of the appeal.

“I am trying really hard to,” Judge Barrington Parker Jr. said. “It almost seems like you’re spending more ink on Judge Kaplan than on the merits.”