The cryptocurrency exchange FTX has launched a dedicated website for affected customers. Why is it needed?
Victims of the FTX bankruptcy can now visit a new website created specifically for the defrauded customers of the exchange that collapsed last November. Creating a separate portal exclusively for the victims of the FTX bankruptcy is a logical step, as their number exceeds the one million mark. The exchange had more than a hundred thousand creditors alone, and this figure does not include ordinary users. Let’s look at what’s happening in more detail.
We note that analysts are finding the most unexpected consequences of the collapse of the cryptocurrency exchange FTX. As Glassnode announced the day before, they noticed a significant drop in the number of large Bitcoin transactions of $10 million or more in total transfers. In the chart below, this category of transactions is marked in blue.
Share of Bitcoin transactions of different sizes in total intra-network transfer volume
In early November 2022 – that is, just before FTX collapsed – such transfers accounted for almost 43 per cent of total transactions. Now it has fallen to 19 per cent. Exactly what role FTX and its former management play in these statistics is unclear. However, the dramatic change in the behaviour of BTC owners is still noticeable.
What will happen to FTX users?
Federal prosecutors filed petition papers to use the website to contact affected customers on Friday. US District Judge Lewis Kaplan, who is overseeing FTX’s bankruptcy case, approved the application on the same day. Former FTX CEO Sam Bankman-Fried himself is now under house arrest – he was released from the courtroom on $250 million bail, which has not been paid.
US court practice has its own nuances that can sometimes seriously slow down large-scale cases. For example, in criminal cases, prosecutors are required to notify victims before plea or sentencing and give them enough time to testify if they want to be heard. In the aforementioned application for a website, prosecutors noted that it was impractical to contact each of the more than one million victims.
Judge Kaplan left the following note on the trial record on this point.
Based on the number of victims to be notified, the court will decide how they will be heard at such proceedings.
Announcement on website for victims of FTX bankruptcy
It will be recalled that Bankman-Fried was succeeded by John Ray III, a lawyer who has experience in restructuring the debts of large companies. Back in December, during a meeting of the US House of Representatives Financial Services Committee, he said that some US clients had been using FTX.com’s main portal. And this should not in fact be the case, as a separate platform FTX.US was operating for US residents.
Here is the relevant cue.
We know that there were 2.7 million users on the US platform FTX US, which again is an overestimate because people could have multiple accounts each. The main platform FTX.com had over 7.6 million users – again, an inflated figure. So we need to sort out the exact number of these customers. But it’s unlikely that many of them will be able to appear in person in Manhattan court.
Former FTX CEO Sam Bankman-Fried
Traffic analysis by service CoinGecko showed that South Korea, Singapore and Japan accounted for 16 per cent of all visits to FTX.com just before the exchange went bankrupt. Although the site was set up to automatically detect a user’s location in the US and then redirect them to FTX US, US customers still accounted for 2 per cent of all FTX.com traffic.
Top countries in terms of unique visits to FTX.com
It should be noted that the DOJ criminal case against FTX founder Sam Bankman-Friede in the Southern District of New York is entirely independent of the bankruptcy proceedings that have been pending in Delaware since November. US prosecutors have charged Bankman-Fried with eight criminal charges, including wire fraud and conspiracy to launder money. Sam was extradited to the US on 21 December and appeared in court a short time later to plead not guilty to all the criminal charges against him.
Federal prosecutors have also charged former Alameda Research CEO Caroline Allison and FTX co-founder Gary Wang, with both pleading guilty and cooperating with investigators in the case against Sam.
Sam Bunkman-Fried, Caroline Ellison and Gary Wang
According to Decrypt’s sources, the steps being taken by the court and FTX liquidators to make amends should be more proactive. Still, there are signs in the bankruptcy case that millions of creditors and users are beginning to lose patience. Earlier, an ad hoc committee of creditors of FTX Trading, represented by law firm Venable, objected to FTX’s request for more time to make a detailed report on its assets and liabilities. Accordingly, the former users do not want to wait too long.
FTX’s lawyers initially asked for an extension to the November 17 deadline, pushing the date of the report to January 23. Then, on December 21, FTX filed another request to move the deadline to April 15. But the special committee does not think the extra time will make a difference. Therefore, we would like to believe that investors’ impatience will be satisfied as soon as possible.
We believe that former users of cryptocurrency exchange FTX will not be able to get their own money back anytime soon. And while the platform's new management is taking steps in that direction - such as returning donations made on behalf of Sam Bankman-Fried and others - the amount received may still not be enough to meet all needs. Be that as it may, it's worth keeping an eye on the progress.
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