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> That's preparation for "clawback", where transfers that occurred prior to the bankruptcy are undone. Anything in the 90 days prior to the bankruptcy gets look

by bmitc 4y ago

> That's preparation for "clawback", where transfers that occurred prior to the bankruptcy are undone. Anything in the 90 days prior to the bankruptcy gets looked at hard, and the bankruptcy can go back further where fraud is involved. The Madoff Recovery operation used clawback heavily. Which is why the Madoff recovery took so long, but got a sizable fraction of the money back. Lots of lawsuits against people who thought they got out in time. Expect that here. This clears up some questions I had before about employees potentially taking their own funds. Although, are customers in the clear here? As in, if you were a customer but were able to take your money out in time, is that money safe, or is some of it returned and then divided up?

Animats 4y ago
If you withdrew funds in the 90 days before the bankruptcy, even if you're not at all involved with FTX's operations, you might be considered to be a creditor of the bankruptcy and face clawback. Nobody will bother for the little guys, but anybody who got out 7 figures or above will get some attention. In which case you'll need an attorney. This is complicated. For a guide to how this goes, see the Madoff recovery.[1] That took a long time, with payouts along the way. The big question was whether the amount owed was what customers had deposited with Madoff, or what customer's listed balances were with Madoff after years of fake gains. With the Madoff scam lasting decades, the fake yields were substantial. That was settled with a court decision that the amount deposited was what mattered. This controversy stalled payouts for some time. Then, over the years, there were some big clawbacks, followed by distributions to victims. Many of the clawbacks involved people who were insiders in some sense, and they were deemed to have profited from the scam. The Madoff recovery got back about 75% of what people had put in. That's unusually good. Most of that was from clawbacks. Madoff, though, was a regulated broker. The Security Investor Protection Act applied. Small investor losses (up to $500,000) were fully covered by SIPC insurance and paid out early. The SIPC ran the recovery process. There was an accelerated process for hardship cases. In crypto, there's none of that. [1] https://www.madofftrustee.com/ https://www.madofftrustee.com/
- bmitc 4y ago
  Thanks for all those details. It’s gonna be a rough road for all their customers, especially those who had a lot of money deposited.

by bmitc 4y ago

Animats 4y ago

If you withdrew funds in the 90 days before the bankruptcy, even if you're not at all involved with FTX's operations, you might be considered to be a creditor of the bankruptcy and face clawback. Nobody will bother for the little guys, but anybody who got out 7 figures or above will get some attention. In which case you'll need an attorney. This is complicated. For a guide to how this goes, see the Madoff recovery.[1] That took a long time, with payouts along the way. The big question was whether the amount owed was what customers had deposited with Madoff, or what customer's listed balances were with Madoff after years of fake gains. With the Madoff scam lasting decades, the fake yields were substantial. That was settled with a court decision that the amount deposited was what mattered. This controversy stalled payouts for some time. Then, over the years, there were some big clawbacks, followed by distributions to victims. Many of the clawbacks involved people who were insiders in some sense, and they were deemed to have profited from the scam. The Madoff recovery got back about 75% of what people had put in. That's unusually good. Most of that was from clawbacks. Madoff, though, was a regulated broker. The Security Investor Protection Act applied. Small investor losses (up to $500,000) were fully covered by SIPC insurance and paid out early. The SIPC ran the recovery process. There was an accelerated process for hardship cases. In crypto, there's none of that. [1] https://www.madofftrustee.com/ https://www.madofftrustee.com/

bmitc 4y ago
Thanks for all those details. It’s gonna be a rough road for all their customers, especially those who had a lot of money deposited.