After the collapse of cryptocurrency exchange FTX, which was once valued at $32 billion, most of the attention has focused on the now bankrupt firm’s most prominent investors and famous backers.
But with over 1 million creditors, many young and parent investors will hold the bag.
A bankruptcy court hearing scheduled for 10 a.m. EST on Friday could shed more light on the entire spectrum of those who lost money as FTX exploded. A motion to publish a full list of FTX’s creditors, including their names and email addresses, will be considered at the hearing.
Sheila Bair, former chairman of the Federal Deposit Insurance Corporation (FDIC), recently told Fox Business that the real tragedy of FTX’s collapse is that there are “potentially a million much smaller investors and proportionally those who will really suffer.”
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Bair noted that FTX, and the crypto industry in general, has been heavily marketed to young people, and said he was “disappointed” that many who were attracted to the company were less likely to get their investment back.
He suggested that to prevent a similar collapse in the future, crypto exchanges should show proof of reserve and some supervisory sanctions should be imposed.
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Current FTX CEO John J. Ray III, a corporate restructuring expert who managed the bankruptcy of energy trader Enron, testified before the House Financial Services Committee on Tuesday that customers who have invested their money in FTX and its affiliates should not wait for hope. full recovery of their investment.
“We’re never going to get all these assets back,” Ray said frankly.
FTX stated in its early filings in the early stages of bankruptcy proceedings that it owed over $3 billion to its 50 largest unsecured creditors. At that time, the firm was able to identify 100,000 creditors it was aware of, most of whom were FTX customers.
However, the total number of creditors could eventually rise above 1 million as the bankruptcy of FTX and its 130+ subsidiaries could also affect former customers and others.
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Sam Bankman-Fried, founder and former CEO of FTX, was arrested by authorities in the Bahamas on Monday and is expected to be extradited at a later date.
Federal prosecutors announced on Tuesday that Bankman-Fried has been charged with eight counts that carry a total maximum sentence of 115 years in the United States. Charges against him include electronic fraud against customers and a related conspiracy charge; radio fraud and a conspiracy charge against lenders; conspiracy to violate commodity fraud, securities fraud, money laundering and campaign finance laws.
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Damian Williams, the US Attorney for the Southern District of New York, said comparisons were made in the Bankman-Fried case. Bernie Madoff’s Ponzi scheme and the Enron scandalIt will go down as “one of the biggest scams in American history”.
Breck Dumas of Fox Business contributed to this story.