The community speculates on the timing of compensation payments

Work is underway to return funds to account holders affected by the FTX collapse. Amid speculation about the timing of the payments, information appeared on the network that FTX crypto holders could begin receiving payments as early as Sep. 30.

However, this was soon refuted — according to the latest data from the bankruptcy case materials under Chapter 11, the court is still studying a compensation plan.

The court filing shows that the next hearing to approve the restructuring plan is scheduled for Oct. 7. If the court approves the plan, payments for claims under $50,000 could begin in late 2024,
while others will receive compensation during the first half of 2025.

FTT Reacts With Growth

Amid the recent news, FTX has delighted investors. Hoping that the infamous crypto exchange would soon begin returning funds, investors have become more optimistic. Such an event could lead to an influx of $16 billion into the market.

At its peak on Sep. 29, the FTX token (FTT) had gained 113% in a day. By the end of the day, the price had corrected and eventually dropped to $2.11 at the time of writing.

Where did the client funds go?

FTX, once worth $32 billion, used client funds for risky investments through its closely associated hedge fund, Alameda Research. Investigations revealed that the company used client funds to cover losses in other related businesses and finance risky investment deals.

FTX’s colossal budget deficit was discovered after clients requested their money back. After FTX’s bankruptcy, a restructuring procedure was initiated, and processes began to return funds to clients. However, at that time, the exact reasons for the disappearance of funds and where they were sent remained the subject of an investigation. In total, the exchange owes about $9 billion.

Victims are waiting, and the culprits are serving their sentences

FTX’s bankruptcy shook the crypto market and affected the prices of many coins. It also raised concerns among users and regulators about the security and liability of crypto exchanges. In addition to creating a refund plan, the exchange’s top managers are being punished one after another.

Bankman-Fried was charged with fraud, money laundering, and other financial crimes related to the management of FTX and client payments. The charges are based on the fact that he allegedly used client funds to support his other businesses, including the trading company Alameda Research. In March, he was sentenced to 25 years in prison.

Caroline Ellison, former CEO of Alameda Research CEO, was sentenced to two years in prison and forfeited $11 billion on fraud and money laundering charges. Her active cooperation in the investigation of Bankman-Fried mitigated the verdict. The judge emphasized that the collapse of FTX is one of the most significant financial crimes, and Ellison’s cooperation does not absolve her of responsibility. She admitted her guilt and apologized to the victims.

Following the verdict of the former Alameda CEO, other defendants are now awaiting court decisions: FTX co-founder and CTO Gary Wang, as well as head of engineering Nishad Singh.

In a sympathetic note to Judge Lewis Kaplan, prosecutors praised her “extraordinary cooperation with the government” and said this should be reflected in her punishment. The note concluded:

“The government cannot think of another cooperating witness in recent history who has received a greater level of attention and harassment. The attendant professional consequences of this level of notoriety are obvious and unlikely to be shortlived. Throughout, however, and certainly during her testimony, Ellison steadfastly remained candid and dedicated to telling the truth—as embarrassing as it often was for her—and in assisting with bringing the most culpable party to justice.

At the hearing, the judge declared that Ellison had been “very incriminating of herself,” consistent in her testimony, and a 110-year term would be “absurd.”

However, the judge concluded that she was “by no means free of culpability” and sentenced her to two years in prison.

Why prosecutors praised Ellison

Faced with Bankman-Fried’s “systematic destruction of evidence,” prosecutors argued that Ellison provided “credible and detailed information” about her significant role in his crimes, allowing them to establish a clearer picture of his wrongdoing.

It was also noted that Ellison had cautioned SBF against Alameda’s aggressive borrowing, predicting that the firm would eventually have to use FTX funds if the market turned.

“As FTX collapsed, Bankman-Fried persisted in publicly denying knowledge and fault. Ellison, on the other hand, expressed relief that the fraud was exposed, and responsibility for her wrongdoing,” prosecutors wrote in their sentencing remarks. The judge agreed that she had cooperated fully, while Bankman-Fried was “the opposite.”

After making her way through an almighty paparazzi scrum during the three days she gave evidence, Ellison spoke of her on-off relationship with SBF, directly accused him of committing crimes, and claimed his unkempt appearance was a deliberate attempt to boost FTX’s image.

Her testimony played a pivotal role in Bankman-Fried’s conviction and subsequent 25-year prison sentence for defrauding customers and investors. He is currently appealing his punishment.

Pointing out that many of the allegations would have been difficult to prove without her help, prosecutors added: “The timeliness of Ellison’s cooperation contributed to the speed with which the government was able to indict Bankman-Fried, ensuring that he did not flee the Bahamas or further obstruct the government’s investigation.”

While some argue that Ellison’s sentence is unduly lenient, prosecutors emphasized that she would face consequences for years to come.

They noted that Bankman-Fried had leaked her private writings to The New York Times in an attempt to undercut her testimony — and delicate details she had shared to a therapist had ended up appearing in Going Infinite by Michael Lewis. Prosectuors wrote last week:

Her physical appearance was scrutinized and criticized, and she was mocked in memes and other content on social media. Numerous films and TV shows are in production about the downfall of FTX, which will only perpetuate the public scrutiny Ellison has faced to date … the attendant professional consequences of this level of notoriety are obvious.

Ellison’s lawyer added that their client “will carry shame and remorse to her grave” — and Bankman-Fried had a direct role in warping her moral compass.

Anjan Sahni went on to note that she was also affected when FTX suddenly suspended withdrawals and careened into bankruptcy, as “the vast majority of her savings” were on this platform.

“She will never profit from her role in this crime,” Sahni added.

Ellison, who turns 30 in November, was portrayed as someone focused on rebuilding her life through volunteering and writing a math textbook. It is unlikely she will retain any of the earnings she made at Alameda Research. Her legal team wrote:

Caroline’s participation in the criminal conspiracies at Alameda Research is a dramatic departure from her otherwise law-abiding nature. She poses no risk of recidivism. Sending Caroline to prison is entirely unnecessary, either for specific deterrence or to safeguard the public. Caroline is unlikely to reoffend because she did not commit these crimes out of greed.

There is no discounting the seriousness of Ellison’s crimes or her role in damaging the financial health of countless FTX customers. But in the eyes of both the prosecution and the defense, she was also crucial in untangling the mess that followed.

Almost two years on, and 98% of those owed money by this doomed exchange are receiving their initial investments in full — along with an additional 18% on top as compensation.

The outcome could have been very different had Ellison not cooperated so closely—reflected in the sentence she received.