Witness’ Unraveling of FTX Spending Ignites Clawback Calls

Professor Peter D. Easton unravels FTX’s spending sparking calls for more clawbacks.

Man welcoming a huge clawreaching down from the sky.
Created by Gabor Kovacs from DailyCoin
  • Accounting Professor Peter D. Easton has unraveled FTX’s tangled spending web.
  • The testimony in the Sam Bankman-Fried (SBF) trial has sparked calls for more clawbacks.
  • Binance and Anthony Scaramucci’s SkyBridge Capital are among the firms the FTX estate could target.

On Wednesday, October 18, the prosecution in the Sam Bankman-Fried (SBF) trial followed up testimony from the final member of the disgraced FTX founder’s inner circle, Nishad Singh, with testimony from Peter D. Easton, a professor of accounting at the University of Notre Dame. 

At the direction of the prosecution, Easton helped the jury follow the thread of FTX’s spending, highlighting the multiple instances where these funds came from customer deposits. The testimony has sparked a flurry of discussions about clawbacks.

Users Call for Clawbacks From Binance, SkyBridge, and More 

The recipients of FTX customer funds outlined by the expert witness include Anthony Scaramucci’s SkyBridge Capital, Mind The Gap, Modulo Capital, and Binance, as testimony so far has revealed that Bankman-Fried partly funded his move to buy out the latter with over $1 billion in customer deposits.

Reacting to reports of the testimony online, several crypto community members have called for the clawback of these funds.

The clawback clause allows restructuring officers to nullify transactions for the benefit of creditors. Restructuring officers can use the clawback clause to recoup assets in fraudulent transfers made within two years of the estate’s bankruptcy and assets involved in preferential payments made within three months of the bankruptcy filing.

Using this clause, in March 2023, the FTX restructuring officers entered a deal with Modulo Capital to recoup about $460 million. The estate also seeks to recoup about $700 million paid to celebrities and politicians, millions allegedly funneled by Bankman-Fried’s parents and about $1 billion from Bankman-Fried and his close associates

Will the FTX Estate Go After Binance and SkyBridge?

It is currently unclear if the estate will go after payments made to SkyBridge. But, as reported by DailyCoin in August 2023, restructuring officers held at least four meetings in June 2023 to discuss the prospect of recouping FTX’s $2.1 billion payment to buy out Binance’s stake in the exchange.

Earlier this year, the FTX estate disclosed that it had recovered $7.3 billion in liquid assets to make creditors and customers whole. On Monday, October 16, they revealed that they had entered a deal that could see customers recoup up to 90% of their holdings on the exchange. 

Clawbacks from SkyBridge and Binance could significantly boost these numbers.

On the Flipside

  • Clawing back funds can often involve lawsuits, which can drag on for months.

Why This Matters

More clawbacks can significantly improve the chances that debtors would be able to make FTX customers whole.

Read this to learn more about FTX’s deal to make customers whole:
FTX Debtors to Return 90% of Creditor Holdings to Customers

Find out why Manta Network is ditching the OP Stack for the Polygon CDK:
Here’s Why Manta Is Ditching OP Stack for the Polygon CDK

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Okoya David

David Okoya is a crypto news reporter at DailyCoin based in Nigeria. He covers various topics related to the cryptocurrency industry, including exchanges, regulations, and price movements, and strives to bring fresh angles to breaking news. With experience as a freelance crypto news writer, David upholds the highest journalistic standards, telling complete stories and answering lingering questions whenever possible.