John Ray exposes ‘vast’ harm to FTX customers, counters SBF’s solvency claims

FTX CEO John Ray III has debunked Sam Bankman-Fried’s (SBF) claims about the level of losses suffered by users of the defunct exchange.

In a March 20 letter to Judge Kaplan, Ray said Bankman-Fried’s statements were “categorically, callously, and demonstrably false” because the exchange users would “never be in the same position they would have been had they not crossed paths” with the convicted founder and his companies.

Over the past weeks, SBF’s lawyers have called for a reduced prison sentence, arguing that the failed exchange was solvent at its bankruptcy and that there were no tangible losses as the bankruptcy proceedings would ensure full recovery “with interest” to all concerned parties.

‘Vast harm’

Contradicting these claims, Ray — appointed CEO on Nov. 11, 2022, amid the collapse —  depicted a strenuous recovery process from what he described as a “dumpster fire” to nearing a plan of reorganization that promises significant returns to creditors.

Ray said the harm done to FTX customers was “vast,” and SBF has shown no remorse for his actions. He detailed the misallocation of assets towards luxury items, speculative ventures, and other inappropriate expenditures as part of a “sprawling criminal enterprise.”

Ray stated:

“When I took over as CEO, there were only 105 Bitcoins left on the FTX.com exchange, against customer entitlements of nearly 100,000 bitcoins. Why were the bitcoins missing?”

Ray explained that SBF’s theft of these assets prevents the bankrupt exchange from returning the assets to impacted customers “in-kind” because FTX did not possess the crypto that customers assumed was held in their accounts as of the time of bankruptcy.

He added:

“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.”

Ray concluded that SBF has continued to live a life of “delusion,” adding that the disgraced founder did not leave a “solvent nor safe” business at the time of bankruptcy in 2022.

Restructuring efforts

Discussing the FTX bankruptcy recoveries, Ray criticized SBF’s optimistic views on creditor reimbursement. He pointed out the improbability of full economic recovery for creditors.

He emphasized the valuation challenges of crypto claims based on the bankruptcy petition date, which does not reflect their current, higher market values due to “back door” borrowing orchestrated by SBF.

Ray attributed the potential for recovering assets to the professionals’ dedication working under him, disputing SBF’s portrayal of an unjustified bankruptcy filing. He praised his restructuring team for transforming “a metaphorical dumpster fire to a debtor-in-possession.”

According to the FTX CEO:

“Things that [SBF] stole, things he converted into other things, whether they were investments in Bahamas real estate, cryptocurrencies or speculative ventures, were successfully recovered through the enormous efforts of a dedicated group of professionals.”

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