FTX, the collapsed cryptocurrency exchange founded by Sam Bankman-Fried, has started trying to claw back payments made by its former management to politicians, celebrities and charities, as it continues to progress through bankruptcy proceedings in the US.
FTX “intends to commence actions before the bankruptcy court to require the return of such payments, with interest accruing from the date any action is commenced”, the company said, sharing an email address – FTXrepay@ftx.us – that recipients could use to voluntarily return money.
“Recipients are cautioned that making a payment or donation to a third party (including a charity) in the amount of any payment received from a FTX contributor does not prevent the FTX debtors from seeking recovery from the recipient or any subsequent transferee,” FTX added in a statement.
Bankman-Fried, other members of FTX leadership and a number of members of the FTX group all developed reputations for corporate philanthropy to the tune of hundreds of millions of dollars.
He was one of the largest political donors in the United States, giving directly to Democratic politicians and to Republican causes. Other members of the FTX inner circle were also high-profile donors, such as Ryan Salame, the co-chief executive of FTX’s Bahamian subsidiary.
As well as political causes, Bankman-Fried donated large sums to charities, endowing the FTX Foundation and FTX Future Fund to promote his interests.
The FTX Foundation had given away $140m (£115m), the organisation reported in October, of which $90m had gone to the Future Fund.
In criminal charges filed in the state of New York, the Department of Justice has alleged that the donations were the result of criminal money laundering, since the money was effectively taken from customer accounts.
The charges also allege campaign finance violations, arguing that Bankman-Fried “and others known and unknown” broke donation limits by making contributions in the names of other people.
Clawing back payments made to politicians and charities is likely to be one of the easier parts of the bankruptcy process.
Under US law, payments or transfers made within 90 days of bankruptcy are presumed to be preferential if they result in a creditor getting more than it would have been entitled to at the end of the bankruptcy process, and a “clawback” can attempt to recover the difference in the payments.
With FTX, which lost more than $8bn from customer withdrawals in a day less than a week before it declared bankruptcy, there could be billions of dollars that the court decides were distributed unfairly.
Retail depositors, however, will be hoping that they aren’t treated as typical creditors. In FTX’s terms of service, the company said depositors didn’t hand over ownership of their deposits, which has led some creditors to argue that the crypto they placed in the exchange should not be used to pay the company’s bills.
In another crypto bankruptcy, for BlockFi, a shadow bank that went bust after FTX, the court is now ruling on that question.
BlockFi filed a motion on Monday with the New Jersey bankruptcy court arguing: “The BlockFi Wallet terms of service are clear. They provide that ‘title to the cryptocurrency held in your BlockFi Wallet shall at all times remain with you and shall not transfer to BlockFi.’
“The debtors have no legal or equitable interest in cryptocurrency that was present in the Wallet accounts as of platform pause, and clients should be able to withdraw such assets from the platform if they choose.”
As such, normal retail depositors should be able to withdraw their assets, the shadow bank said.