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HomeMarketFTX U.S. Customers' Funds Might Take Years to Recover: Experts

FTX U.S. Customers’ Funds Might Take Years to Recover: Experts

The FTX bankruptcy will be a complicated process taking months or year, attorneys say.

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Oliver Douliery/AFP/Getty Images

FTX founder Sam Bankman-Fried is raising hopes for U.S. customers that they might be able to get their crypto back quickly. They shouldn’t hold their breath, banktuptcy attorneys say.

Bankman-Fried on Thursday said on Twitter many of the firm’s problems didn’t extend to customers of FTX US, the U.S. affiliate of FTX that was run as a separate company.

“When I filed, I’m fairly sure FTX US was solvent, and that all U.S. customers could be made whole. To my knowledge, it still is today,” Bankman-Fried wrote. “I was expecting that to happen. I’m surprised it hasn’t. I’m not sure why US withdrawals were turned off.”

While its Bahamas-based sister-firm grew to be the second-largest crypto exchange, FTX US was a fast-growing but relatively small trading platform before its collapse. In January, the firm raised $400 million from investors, valuing the U.S. affiliate at about $8 billion, compared with a $32 billion valuation for

While Bankman-Fried founded FTX US, it was run as a separate company from the international exchange and had more limited offerings for traders. Similar to other U.S. crypto exchanges, it registered as a money-services business, licensed to transfer currency between customers but not subject to the more stringent oversight given to brokerages from agencies such as the Securities and Exchange Commission or the Commodity Futures Trading Commission.

Bankman-Fried made similar remarks in a New York Times Dealbook interview on Wednesday. On Twitter and in the interview, Bankman-Fried didn’t offer details on why he believed it to be the case that U.S. client assets weren’t missing, but current and former FTX officials told Barron’s that the remarks were consistent with their understanding of how the businesses were run, with assets in the separate U.S. company kept independent from those of the international affiliate. LedgerX, a CFTC-regulated exchange acquired by FTX US last year, also has separate finances, didn’t enter bankruptcy and is still operational.

FTX representatives didn’t respond to requests for comment.

Even if FTX US is found to have all its customers’ assets, it could still take months, if not years for the customers to get them back, bankruptcy attorneys say.

For one, the attorneys representing FTX and likely an independent investigator will need to take time to sort out how well the funds were kept track of and if they truly were segregated from each other. The company’s early court filings, in which current FTX CEO John J. Ray described company controls as the worst he’s ever seen, indicate that process alone could take months.

Customers of and the other affiliates can also mount their own challenges, arguing that some or all of FTX US’s assets should actually go to the broader group of aggrieved customers.

Meanwhile, FTX’s attorneys will be trying to recoup customers’ funds by finding buyers for some of the companies’ assets and hunting for hundreds of millions of dollars worth of crypto that was allegedly taken without authorization as the firms entered bankruptcy. For example, FTX US owns Embed Financial Technologies, which carries a number of brokerage-related licenses and could carry substantial value if sold.

In an optimistic case–where U.S. funds aren’t missing and they’re found to belong to the FTX US customers alone–the customers could begin to see funds returned in six to nine months, says Howard Ehrenberg, a bankruptcy attorney at Greenspoon Marder who also serves as a bankruptcy trustee. In more harrowing scenarios, the decision could drag out for a couple years if customers see their funds back at all, he says.

“There will be a lot of effort to move this along but it’s still going to be tedious and time consuming,” Ehrenberg says.

Some bankruptcies have taken even longer. Former customers of Mt. Gox, a Tokyo-based crypto exchange that went offline in 2014, are only just now beginning to get some of their assets back. Customers of MF Global Holdings, a brokerage that went bankrupt in 2011, eventually received all of their funds back, with the help of insurance unavailable to crypto brokerages, but that still took more than two years.

“This is a huge mess with a lot that needs to be sorted out,” says Dan Lowenthal, who chairs the bankruptcy practice of Patterson Belknap. “A lot needs to be determined factually, financially and legally before we have a better sense of how long this will take.”

Write to Joe Light at


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