FTX bankruptcy unique, losses hard to determine: Ken Feinberg
FTX contagion continues as BlockFi bankruptcy filed Monday
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The implosion of Sam Bankman-Fried’s FTX is even murkier than many thought and determining the value of the company’s billions in assets for the more than one million customers seeking financial redemption will not be easy.
"This is a unique case" attorney Ken Feinberg, who oversaw the 9/11 Victims Compensation Fund as well as Boeing’s 737 Max jet fund among others, told FOX Business. "It's more difficult to determine the value of the asset because it's in the Bahamas, it's cryptocurrency. It may also be difficult to estimate the losses suffered by the creditors" he explained. Feinberg, who also oversaw compensation funds for the victims of the Boston Bombings, said any potential fund would be a "ways down the road" if needed.
FTX: HOW SAM BANKMAN-FRIED BUILT A HOUSE OF CARDS
Kenneth Feinberg (Associated Press)
Because it is crypto, Feinberg expects more eyes on the case than if it were your plain vanilla bankruptcy. "It's a huge alleged, huge loss. Investors lost a fortune. And that's major, and I think a lot of people because its crypto will be looking to see what happens," he added.
INVESTOR CONNED IN FTX SCANDAL SPEAKS OUT
On Monday, crypto trading firm BlockFi filed for bankruptcy protection and listed 100,000 creditors with liabilities ranging from $1 billion to $10 billion. "Due to the recent collapse of FTX and its ensuing bankruptcy process, which remains ongoing, the Company expects that recoveries from FTX will be delayed" the company stated.
Lawmakers are already piling on with the first of series of hearings slated for Thursday. The Senate Agriculture Committee will hold a hearing about the "FTX collapse and the need for congressional action" it stated.
Per reports, about $1.2 billion in cash has been recovered, but that is a fraction of what is owed to the unnamed 50 largest creditors. There are also the smaller investors on the hook.
"There are "potentially a million much smaller investors – and proportionately, they're the ones that are really going to get hurt" former Federal Deposit Insurance Corporation chair Sheila Bair told FOX Business last week.
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Former FDIC chair Sheila Bair explains why she was shocked by the collapse of FTX under founder Sam Bankman-Fried on 'Cavuto: Coast to Coast.'
Once the world's third-largest exchange valued at around $32 billion, FTX was thrown into a liquidity crisis after CEO Sam Bankman-Fried announced on Nov. 11 that the firm and over 130 entities including trading arm Alameda Research would file for bankrupty.
Before the FTX fallout, cryptocurrencies, like stocks, have been under pressure as investors cut exposure to risk. The contagion has added more downside pressure with Bitcoin, the largest crypto by market value, falling to the $16,000 level.
NEW FTX BOSS CONDEMNS BANKMAN-FRIED FOR 'COMPLETE FAILURE OF CORPORATE CONTROLS'
In the first bankruptcy hearing last week, one FTX lawyer said Bankman-Fried used the firm as his "personal fiefdom" while John J. Ray III who has taken over FTX following the bankruptcy, had even harsher words for the cyrpto management team.
"Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here," Ray said in a filing on Nov. 17.