FTX Victims Face a Tough Road Getting Their Money Back

Why getting back money from FTX will be so hard

The legion of creditors who lost billions in last month’s collapse of the crypto exchange FTX just got a tiny piece of good news: A number of parties that received payments and political contributions from the company; its jailed founder, Sam Bankman-Fried; and his associates have expressed a willingness to return the money, FTX said in a statement Monday night.

Politicians were among the biggest benefactors. Mr. Bankman-Fried; Ryan Salame, the former co-C.E.O. of FTX; and Nishad Singh, a former head of engineering at the company, have donated a total of $84.3 million to Democrats, Republicans and political action committees since 2019, according to data collected by OpenSecrets.org and shared with DealBook. Some politicians, including Hakeem Jeffries, the incoming Democratic leader in the House, and Representative-elect Aaron Bean, a Republican from Florida, have returned donations or given the money to charity since FTX fell into scandal.

Clawing back enough to make creditors whole will be difficult. FTX went bankrupt last month owing more than $3 billion to its top 50 creditors and having racked up losses that exceeded $8 billion.

Many commentators have pointed to the case of Bernie Madoff, the poster child for Ponzi schemers, as a model for how FTX’s new C.E.O., John Ray III, and a bankruptcy court might collect assets to repay depositors. In that case, judges ruled that a court-appointed trustee, Irving Picard, was allowed to claw back funds from anyone who pulled out more money than they put in.

Article source: https://www.nytimes.com/2022/12/20/business/dealbook/sbf-madoff-ftx-fraud.html