Former FTX General Counsel Says He “Never Approved Loans of FTX Customer Funds” To Affiliate Alameda

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"I Never Approved Loans of FTX Customer Funds" Says Former FTX General Counsel
"I Never Approved Loans of FTX Customer Funds" Says Former FTX General Counsel

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Former FTX general counsel Can Sun denied approving the lending of customer funds to sister firm Alameda Research in testimony yesterday at the trial for fraud and conspiracy of founder Sam Bankman-Fried. 

Sun, who worked at the exchange from August 2021 until its collapse in November last year, said that his conversations with Bankman-Fried had led him to believed that customer funds were segregated from those of FTX and its affiliates.

The prosecution presented FTX’s terms of service and other public statements to highlight the supposed separation of customer funds from the company’s own. 

The trial also revealed yesterday that FTX had used customer funds to buy back crypto exchange Binance’s stake in the company.

Binance CEO Changpeng Zhao had disclosed last year that that his company had received more than $2.1 billion in Binance USD (BUSD) stablecoins and FTX’s FTT tokens as part of the repurchase agreement. 

FTX Proposed Plan for Creditor Holdings

FTX had earlier proposed a plan to return up to 90% of creditor holdings to those affected by its bankruptcy.

“The FTX Debtors estimate that customers of FTX.com and FTX US would receive, collectively, over 90% of distributable value worldwide if the Amended Plan (incorporating the Customer Shortfall Settlement) is approved by the Bankruptcy Court by the end of the second quarter of 2024,” it said.

The plan, which will be formally filed by the debtors’ group by December 16, divides missing customer assets into three pools: FTX.com customers, FTX.US customers, and a “General Pool” for other assets.

Customers with a preference settlement amount of less than $250,000 will be able to accept the settlement without any reduction of claim or payment. The preference settlement represents 15% of customer withdrawals from the exchange nine days before its collapse, the statement stated.

However, these payouts may be subject to various factors such as taxes, government claims, and token price fluctuations, potentially affecting the final amount received by creditors.

Excluding Insiders and Affiliates

The debtors have also stated that they may exclude “insiders, affiliates, customers” from the settlement if they were aware of the mixing and misuse of customer deposits and corporate funds or if they changed their KYC information to facilitate withdrawals during the exchange’s troubled times.

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