bankrupt customersExperts said that it may take years to get their money back, while many may never recover the money.
FTX’s creditors will be first in line to receive whatever assets a bankruptcy judge deems fit to distribute as the company seeks to reorganize as part of its Chapter 11 filing. Investors in the Bahamas-based company, which raised nearly $2 billion in venture capital, would be in second place. The bankruptcy expert told CBS MoneyWatch that this leaves FTX account holders who used the platform to trade bitcoin, solana and other digital currencies at the back of the queue.
Anthony Sabino, a law professor at St. John’s University, expects those clients to recover only a portion of the money they originally deposited. As for the assets customers now have on the platform, they will probably be reduced in value as the FTX bankruptcy process runs it’s course, he said.
“People have been waiting too long, and only heaven knows what it’s going to be worth,” said Sabino, an expert in securities regulation. “It doesn’t look good at all.”
The crypto world has been shaken by the bankruptcy of FTX and it has seen one of the biggest exchanges crumbleFTX and its former CEO, Sam Bankman-Fried, are being investigated in the US and abroad for potential securities infringement.
Sabino said FTX’s bankruptcy is unusual because the Securities and Exchange Commission and the Commodity Futures Trading Commission are investigating the company as it passes Chapter 11. He said the investigation would not delay bankruptcy proceedings, but a judge would pay close attention to what those agencies get.
“I expect the FTX bankruptcy to take a decade or more to process what assets remain and who owns them,” Joshua Peck, an expert in crypto risk, told CBS MoneyWatch.
It doesn’t account for at least $1 billion in customer funding, according to Reuters.
ftx, joeOver the weekend, did not respond to a request for comment.
Peck pointed to Japanese crypto exchange Mount Gox, which was forced to file for bankruptcy after being hacked in 2014, as an example of how such cases can be resolved in court. A bankruptcy trustee in Japan told former Mt Gox users last month that they can now apply for reimbursement of their funds.
“The Mount Gox bankruptcy is the precedent here,” Peck said. “Bankruptcy began in 2014 and is still ongoing.”
The problems facing FTX came to light last week when Bankman-Fried told a group of investors that the company needed about $8 billion to back up the crypto assets of its users. The company experienced the crypto version of the bank earlier this month when users almost withdrew.Amid growing concerns about the solvency of FTX.
Rival Binance was prepared to save FTX, but CEO Changpeng Zhao walked away from a deal this week, citing FTX’s liquidity problems.