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The FTX debtors announced on February 5, 2023, that donation recipients – including political action funds, political figures and other recipients – should return funds or donations received before the crash of FTX.
According to the announcement, lawsuit action is not off the table for those who refuse to comply. The message reads as follows.
“FTX Trading Ltd. (d.b.a. FTX.com) and its affiliated debtors (together, the ‘FTX debtors’), today announced the FTX Debtors are sending confidential messages to political figures, political action funds and other recipients of contributions or other payments that were made by or at the direction of the FTX debtors, Samuel Bankman-Fried or other officers or principals of the FTX debtors (collectively, the ‘FTX contributors’). These recipients are requested to return such funds to the FTX Debtors by February 28, 2023.
“To the extent, such payments are not returned voluntarily, the FTX debtors reserve the right to commence actions before the Bankruptcy Court to require the return of such payments, with interest accruing from the date any action is commenced.”
This announcement follows the one made back on December 19, 2022, where recipients of contributions and donations from FTX indicated intentions to return received funds. The announcement reads as follows.
“FTX Trading Ltd. (d.b.a. FTX.com) and its affiliated debtors (together, the ‘FTX debtors’) today announced the FTX debtors have been approached by a number of recipients of contributions or other payments that were made by or at the direction of the FTX debtors, Samuel Bankman-Fried or other officers or principals of the FTX debtors (collectively, the ‘FTX contributors’).
“These recipients have requested directions for the return of such funds to the FTX debtors. The FTX debtors are working with these recipients to secure the prompt return of such funds to the FTX estates for the benefit of customers and creditors.”
A quick rundown on the FTX case
In November 2022, the US Department of CFTC (Commodity Futures Trading Commission) and the SEC (Security Exchange Commission) filed a lawsuit against Sam Bankman-Fried, the founder of FTX Trading LTD and co-founder of Alameda research.
The suit was based on civil and criminal charges, and Sam Bankman-Fried developed a scheme that extracted over $1.8 billion from equity investors.
The SEC claimed that Bankman-Fried also diverted customers’ assets from FTX Trading LTD to fund Alameda Research, purchased real estate properties and made substantial political donations.
On the contrary, Bankman-Fried claimed that the crash of FTX and the subsequent losses that followed was a result of poor risk management and a series of accounting errors.
However, two of Bankman-Fried close associates, Gary Wang, Alameda co-founder, and Caroline Ellison, the chief executive officer of Alameda, were already cooperating with the prosecution. And they have pleaded guilty to fraud, according to Manhattan US attorney Damian Williams, as reported by the Washington Post.
This was just before Bankman-Fried got extradited to the US. He was released on a $250 million bail.
On December 19, 2022, during the court hearing, Ellison admitted working with Bankman-Fried to knowingly mislead lenders about how much Alameda was borrowing from FTX.
According to the hearing transcript, Ellison said,
“I knew it was wrong.”
Wang, in his defense, also admitted to changing the FXT platform code to allow special privileges to Alameda. He was acting under a directive, he said.
The crypto community has been expressing mixed feelings regarding the FTX incidence, as some fear it might hit a lasting dent in the crypto space.
According to Forbes, going forward on the Bankman-Fried case, it could take several months before a trial begins. This is mostly due to evidence gathering and the number of documents involved in a case of this magnitude.
Nevertheless, given the revelation of both Bankman-Fried’s close associates, we hope to see how the case unravels.
Leo O Okore is a talented crypto writer with a passion for technology and an ability to distill complex topics into digestible pieces of information. With years of experience writing about cryptocurrencies, Leo has established himself as a leading voice in the crypto community, providing insightful and thought-provoking analyses on the latest developments in the world of digital assets.
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