The management of cryptocurrency exchange FTX will not be compensated due to its bankruptcy. What does this have to do with?
FTX founder Sam Bankman-Fried and his inner circle of cryptocurrency exchange executives will not receive financial compensation in the company’s bankruptcy case. Most interestingly, on 10 November, Bankman-Fried, at the time still CEO of the trading platform, promised to allocate funds primarily to compensate customers for losses. As we can see, his announcement still became true, although not quite in the form the former billionaire would have liked. We will tell you more about what is happening.
Note that the situation with the FTX cryptocurrency exchange continues to evolve. Yesterday, it was revealed that the bankrupt platform’s crypto assets include interest from Justin Sun, founder of blockchain project Tron. He confirmed his interest in the following quote to The Wall Street Journal.
We are open to any kind of deal. I think the options are already out there.
Tron founder Justin Sun
He had previously promised to help FTX users who held TRON tokens there in the form of TRX, BTT, JST, SUN and HT. Accordingly, the coins were essentially to be redeemed, but for now this process has been put on hold given the platform’s bankruptcy.
What will happen to the FTX crypto exchange?
According to Decrypt’s sources, Bankman-Fried no longer has authority within its company. Immediately after the FTX management filed for bankruptcy, FTX CEO John Ray III, who is now liquidating the company’s debts and receiving $1,300 an hour for his activities, took over.
In addition, the new management has tried to distance itself as much as possible from Bankman-Fried’s persona, given his strange behaviour of late in the form of deleting tweets, empty public apologies and so on.
Bankman-Fried’s promises of compensation to users
The following quote is from court documents describing the compensation arrangements. Here it is.
No sums will be paid on the authority sought by this petition to any of the following persons or any person known to be related to any of Samuel Bankman-Friede, Gary Wang, Nishad Singh or Caroline Ellison.
It should be noted that such a formulation does make sense for the company's creditors who need to get their money. One might recall here the story of the cryptocurrency fund Three Arrows Capital, which burst in mid-2022 shortly after the collapse of the Terra ecosystem.
It was then revealed in court proceedings that the cryptocurrency fund's creditors were co-founder Su Zhu and the wife of 3AC's second co-founder Kyle Davies. The company owed them $5 million and $65.7 million respectively. Which means in the event of a fund collapse, its co-founder and family members were essentially getting financial insurance. Apparently, this will not be the case with FTX.
FTX founder Sam Bankman-Fried
Normally in bankruptcy cases, debtors – in this case FTX – ask a judge for permission to continue paying their employees, after all, the company’s funds must eventually be frozen. But John Ray noted the high difficulty of finding and reporting on all the exchange’s currently available funds and its liabilities to creditors.
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The cancellation of compensation to FTX’s senior management is a logical decision, as neither Bankman-Fried nor his close colleagues or even relatives have been shortchanged. Further proof of this was uncovered during the court case. It turned out that at least 19 properties worth $121 million were purchased at the expense of FTX in the Bahamas.
Among the acquired properties were seven luxury condominiums. While the names of the actual owners of these properties remain unknown for now, the property document claims that they were to be used as “residences for key personnel” of the bankrupt bourse.
One of the properties acquired by FTX
In addition, the signatories to the $16.4 million property were the parents of former FTX CEO Joseph Bankman and Barbara Fried. The deed designates the property as a “vacation home” and the deeds to the property were drawn up on 15 June 2022. A spokesperson for the couple did not respond to a question from reporters as to exactly how the holiday property was purchased, or whether FTX funds were involved in the deal.
Only one fact has been officially confirmed – Bankman-Frieda’s parents were trying to get the property back to FTX before the bankruptcy. Here is the relevant quote cited by Cointelegraph.
Even before the bankruptcy proceedings, Mr Bankman and Ms Freed tried to recover the company’s property and are awaiting further instructions.
It will be recalled that FTX moved its headquarters from Hong Kong to the Bahamas in September 2021 and the land under it was purchased for $60 million. A groundbreaking ceremony was held in April this year, with a video of the event even published on the official YouTube channel of the Prime Minister of the Bahamas. Here is the relevant video.
We think that such a decision seems quite logical, since refusal to pay the FTX management and relatives of its representatives will make it possible to recover more money from the creditors. In theory, it would also speed up the recovery process, which is important enough. Still, as lawyers have previously reported, such a procedure could drag on for decades, not just years. So there can be no unnecessary action here.
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