Following the collapse of FTX, the cryptocurrency exchange once valued at $32 billion, a lot of attention turned to the now bankrupt company’s most prominent investors and celebrities.
But with over 1 million creditors, many young people and mom-and-pop investors will be left with the bag.
A bankruptcy court hearing, scheduled for Friday at 10 a.m. EST, could shed more light on the full spectrum of those who lost money due to the FTX implosion. A motion to release a full list of FTX’s creditors, including their names and email addresses, will be considered at the hearing.
Former president of the Federal Deposit Insurance Corporation (FDIC), Sheila Bair, recently told Fox Business that the real tragedy of the FTX collapse is that there are “potentially a million much smaller investors, and proportionately they are the ones who are really hurt.” will become.”
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Bair noted that FTX and the crypto industry in general have been heavily marketed to young people and said it “saddens” her that it is unlikely that so many who have invested in the company’s appeal will get their investments back.
She suggested that in order to avoid a similar future collapse, crypto exchanges should be required to show proof of reserves and oversight should be maintained.
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Current FTX CEO John J. Ray III, a corporate restructuring expert who handled the bankruptcy of energy trader Enron, testified before the House Financial Services Committee on Tuesday and indicated that customers who put their money into FTX and its affiliates , should not hope for a full recovery of their investments.
“We’ll never get all these possessions back,” Ray said bluntly.
In initial filings during the early stages of bankruptcy proceedings, FTX indicated it owed its 50 largest unsecured creditors more than $3 billion. At that point, the company was able to identify 100,000 creditors it knew about, most of whom were FTX clients.
However, because the bankruptcy of FTX and its more than 130 affiliates could also affect former clients and others, the total number of creditors could eventually exceed 1 million.
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FTX founder and former CEO Sam Bankman-Fried was arrested by authorities in the Bahamas on Monday and is expected to be extradited at a later date.
Federal prosecutors announced Tuesday that Bankman-Fried has been charged with eight U.S. charges that carry a combined maximum sentence of 115 years in prison. Charges against him include customer telephony fraud, plus a conspiracy charge; lender fraud, plus a conspiracy charge; conspiracies to commit commodities fraud, securities fraud, money laundering and campaign finance violations.
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U.S. Attorney for the Southern District of New York, Damian Williams, said the Bankman-Fried case, which has drawn comparisons to Bernie Madoff’s Ponzi scheme and the Enron scandalwill go down in the books as “one of the greatest con artists in American history”.
Breck Dumas of Fox Business contributed to this story.