FTX Victims View Bankruptcy Process as 'Second Act of Theft,' File to Recover $8B in Forfeited Assets

• FTX victims asked a New York court to rule that the crypto exchange's forfeited assets belong to its customers, not the bankruptcy estate.
• The filing said the bankruptcy code prioritizes certain creditors over others, such that holders of FTX’s FTT token are near the bottom of the priority list.

FTX bankruptcy victims are seeking a ruling that the failed crypto exchange's forfeited assets, some $8 billion, belong to its customers, not the bankruptcy estate, according to a Friday filing in the U.S. District Court for the Southern District of New York.

Last month, the estate proposed a new reorganization plan that would see 98% of creditors get back 118% of their claims – in cash – within 60 days of court approval. The plan irked many of FTX customers, who had missed out on the opportunity to profit from the run-up in crypto prices while their funds were stuck in bankruptcy limbo.

The court filing said FTX filed for bankruptcy during the so-called crypto winter, when cryptocurrency prices saw a dramatic drop. Measuring customer claims at that time value would be profoundly unfair, according to the filing, which said the price of Solana (SOL) has increased ninefold and the price of bitcoin quadrupled since the petition date.

The victims' attorneys, Adam Moskowitz and David Boies, said in the filing the bankruptcy process has left "FTX customers feeling 'aggrieved and robbed,' many of whom view the bankruptcy process as a 'second act of theft' and that the 'FTX bankruptcy estate remains to be the same fraudulent corporate entity' as was the enterprise run by SBF." SBF, is former CEO Sam Bankman-Fried, who was sentenced to 25 years in prison for fraud.

FTX collapsed in November 2022. The lawyers said that the jury found SBF stole no less than $8 billion from FTX customers. Bankman-Fried, who was also ordered to forfeit $11 billion, plans to appeal his sentence and conviction. "If not for SBF’s crimes for which he was convicted—i.e., the theft and misuse of customer assets—the customers would have today owned their crypto investments," the filing said.

The filing also points out that the bankruptcy code requires prioritizing certain creditors over others, such that holders of FTX’s FTT token are near the bottom of the priority list. "It is unlikely that holders of that token will receive compensation from the estate,” it said.

“We don’t know what the damages will be because complete accounting has not been done,” Moskowitz told CoinDesk. While the fluctuating value of crypto might change things, “it is safe to say that over $8 billion” of damages are owed.

Read More: Was Sam Bankman-Fried Proven Right About FTX’s Solvency?