Re:Exec who cleaned up Enron calls FTX mess 'unprecedented'
by Animats on Friday November 18, 2022 @02:56PM
(#33661124)
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.
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/