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FTX expects US to lower bankruptcy claim to $3 billion to $5 billion

An FTX emblem is visible through smashed glass in this image shot, December 13, 2022

NEW YORK, March 21 (mod1s) - Crypto exchange FTX said it hopes to reduce U.S. government claims in its bankruptcy down to $3 billion to $5 billion, leaving no money for shareholders and contradicting a "reckless and false" assertion by founder Sam Bankman-Fried that FTX's failure caused no damage. 

FTX published the estimations in court filings on Wednesday in response to founder Sam Bankman-Fried's allegations that he should get a reduced jail term since FTX would be able to reimburse its consumers "in full". Bankman-Fried was convicted in November of stealing $8 billion from FTX clients.

FTX's current CEO John Ray argued in court documents in Delaware bankruptcy court that Bankman-Fried had twisted the company's previous comments regarding its capacity to repay consumers in bankruptcy to argue that there was "zero" loss to FTX customers, lenders and investors. 

"All of these statements are both reckless and false," Ray wrote. 

"Even the best conceivable outcome in the Chapter 11 proceeding will not yield a true, full economic recovery by all creditors and non-insider equity investors as if the fraud never happened," he stated.

FTX believes that it will have $13.7 billion in assets to pay $31.4 billion in genuine claims, including $9.2 billion in customer claims and $17 billion in claims claimed by the U.S. Commodity Futures Trading Commission and the Internal Revenue Service. 

FTX claimed in January that it expected to pay clients "in full," however that statement came with a key caveat: It will value client claims based on the price of crypto in November 2022, and consumers will gain no benefit from a big spike in crypto values following that date. Many FTX clients are "extremely unhappy" with FTX’s suggested reimbursement, Ray wrote.

FTX planned bankruptcy repayment still faces substantial challenges, including continuing talks over the $17 billion in claims claimed by the U.S. government. 

FTX is working towards a resolution that would enable FTX to reimburse its consumers before the government and lower the overall government claims to between $3 billion and $5 billion. The U.S. government has agreed to prioritize consumer restitution in recent crypto bankruptcies, including the BlockFi and Genesis Global instances.

If the government does not agree to prioritize FTX consumers, its claims might considerably diminish the amount available to refund customers, FTX claimed. 

One group that will surely be damaged by Bankman-Fried’s deception are FTX investors and stockholders, who have little prospect of recovering any money from the company's bankruptcy, according to FTX. FTX will not have enough money to pay shareholders, who are last in line for repayment behind the company’s customers, its lenders and the U.S. government.


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