Sam Bankman-Fried requests new trial claiming FTX had $16.5 billion surplus in 2022, but does it matter?
Sam Bankman-Fried filed a movement for a new trial on Feb. 10, advancing a declare that reframes FTX’s collapse not as fraud-driven insolvency but as a recoverable liquidity disaster.
The movement invokes Rule 33 of the Federal Rules of Criminal Procedure, which allows courts to grant new trials when “the curiosity of justice so requires,” usually when newly found proof surfaces or basic trial errors taint the decision.
SBF’s submitting argues each that testimony from silenced witnesses would have refuted the federal government’s insolvency narrative and that prosecutorial intimidation denied him due course of.
At the movement’s heart sits a putting numerical declare: FTX held a optimistic web asset worth of $16.5 billion as of the November 2022 chapter petition date.
The implication is that if the property can finally repay clients, the trial’s portrayal of billions in stolen, irrecoverable funds was deceptive. According to Reuters, the chapter plan contemplates distributing not less than 118% of shoppers’ November 2022 account values.
However, this accounting argument collides with a deeper query: Does reimbursement erase fraud?
The reply illuminates why “solvency” in crypto exchanges operates throughout dimensions that stability sheets alone can’t seize, and why FTX has develop into a case research in how narratives are constructed when courtroom details and monetary actuality diverge.
Whole in {dollars}, not in form
Bankruptcy regulation fixes claims at a snapshot. Under 11 U.S.C. § 502(b), the worth of creditor claims is decided as of the petition date. In this case, Nov. 11, 2022.
For FTX clients, which means their entitlements have been calculated utilizing crypto costs from the depths of the 2022 market collapse, not the next rally that noticed Bitcoin climb from underneath $17,000 to a peak of $126,000.
Court filings in the Bahamas proceedings make this specific: claims for appreciation after the petition date usually are not a part of the core buyer entitlement. When the property introduced distributions exceeding 100%, that proportion displays petition-date greenback values, not the in-kind restoration of the precise tokens clients believed they held.
A buyer who deposited one Bitcoin in 2021 does not obtain one Bitcoin again. Instead, they obtain the November 2022 dollar-equivalent worth of the Bitcoin, plus a premium reflecting asset recoveries.
Customers objected exactly as a result of the petition-date valuation mechanism excluded them from the crypto market’s subsequent appreciation. Being paid “in full” underneath the chapter doctrine can nonetheless imply being underpaid relative to the asset you thought you owned.
The authorized framework treats crypto balances as dollar-denominated claims, even when customers expertise them as specific-asset holdings with 24/7 withdrawal rights.
Three layers of solvency (and why NAV is not sufficient)
FTX’s movement treats solvency as a single accounting query: do belongings exceed liabilities at a degree in time?
However, crypto exchanges face a extra advanced solvency structure that operates throughout three dimensions.
Accounting solvency, outlined by web asset worth, is the stability sheet view that the movement emphasizes. Even if the $16.5 billion determine is correct, it relies upon fully on valuation selections: which belongings counted, at what haircuts, and the way liabilities have been outlined.
The property’s recoveries benefited from enterprise capital stakes in corporations like Anthropic that weren’t instantly liquid in November 2022 but later returned substantial worth.
Liquidity solvency issues whether or not crypto exchanges are structurally sound. Liabilities are on-demand, usually denominated in particular tokens, and confidence-sensitive.
Academic work analyzing the 2022 “crypto winter” explicitly frames the interval as a run-driven crisis. When FTX confronted its liquidity disaster in November 2022, it processed roughly $5 billion in withdrawal requests over two days.
The query wasn’t whether or not the enterprise portfolio would finally be value one thing, but whether or not liquid, on-chain belongings matched on-demand liabilities in actual time.
Governance solvency is the place fraud enters, no matter restoration.
Did the change signify that buyer belongings have been segregated? Were conflicts of curiosity managed? These questions persist even when the property later recovers sufficient to pay claims.
The IOSCO closing suggestions on crypto-asset regulation deal with conflicts of curiosity and custody/client-asset safety as central failure modes, distinct from easy insolvency.
Why reimbursement would not dissolve fraud
Trial testimony established that Alameda Research, Bankman-Fried’s buying and selling agency, ran what prosecutors described as a multi-billion-dollar deficit in its FTX consumer account, utilizing buyer deposits as collateral and working capital.
The authorities’s case rested on misrepresentation, comprising clients being informed that belongings have been segregated, misuse of funds, with funds commingled and lent to Alameda, and governance failure characterised by threat controls being bypassed or nonexistent.
The movement argues that if clients may be repaid, the “billions in losses” narrative was false. But fraud regulation and chapter regulation ask totally different questions.
Fraud focuses on what was represented on the time and what was completed with buyer property. Bankruptcy focuses on what creditors ultimately recover.
Even underneath the movement’s personal framing, the Debtors’ property initially claimed each FTX and FTX US have been bancrupt on Nov. 11, 2022, then revised that view solely after in depth asset restoration work.
Solvency assessments rely on assumptions, and people assumptions change as illiquid belongings get valued, disputes get resolved, and market circumstances shift.
| Question | Bankruptcy/balance-sheet lens | Criminal/fraud lens | What proof solutions it | What it does not show |
|---|---|---|---|---|
| Were clients “made complete”? | Measured in petition-date USD claims; distributions can exceed 100% of Nov 2022 values | Not the usual; reimbursement doesn’t decide prison legal responsibility | Plan phrases + distribution notices; courtroom orders making use of petition-date valuation; reporting on “≥118% of Nov 2022 account values” | That clients received their cash again, or that wrongdoing didn’t happen |
| Were clients made complete in-kind? | Generally no: entitlement is greenback worth at petition date, not token restitution | Still irrelevant to intent/misrepresentation; in-kind shortfall might present reliance on representations | Bankruptcy valuation rulings; buyer objections re: misplaced upside | That in-kind loss alone proves fraud (it may additionally mirror chapter doctrine) |
| Was there a liquidity mismatch through the run? | Liquidity crunch can exist even when NAV later turns optimistic; runnable liabilities vs illiquid belongings | Can help theories of reckless risk-taking, concealment, or misuse relying on conduct | Withdrawal demand figures; inner liquidity dashboards; contemporaneous comms; timing of pauses/halts | That “it was solely a run” excuses misuse of buyer property |
| Were buyer belongings segregated as represented? | Core governance/custody difficulty; segregation determines how claims and recoveries ought to work | Central to fraud: what was promised vs what was completed with buyer property | TOS/advertising and marketing statements; custody insurance policies; ledger traces; inner controls docs | That later distributions validate earlier custody practices |
| Were conflicts managed (change vs affiliated buying and selling)? | Conflict construction impacts threat, valuation haircuts, recoveries, and creditor outcomes | Conflicts may be proof of intent, concealment, or self-dealing | Org charts; related-party agreements; permissions/allowlists; governance minutes | That conflicts = crime by themselves (but unmanaged conflicts elevate the danger) |
| Did governance/threat controls stop misuse? | Weak controls elevate chance of loss/run; impacts creditor recoveries and supervisory findings | Weak controls can help negligence/recklessness; bypassing controls can help intent | Audit trails; risk-limit methods; exception logs; approval workflows; whistleblower/inner experiences | That “controls existed on paper” means they functioned in follow |
| Did later recoveries change the ex ante conduct? | Recoveries can change the property’s solvency story and payout math over time | Generally no: fraud evaluates conduct and intent on the time | Timeline of asset discovery/valuation revisions; litigation recoveries; VC stake monetizations | That ex submit solvency retroactively makes earlier statements true |
| Does optimistic NAV negate misrepresentation? | Positive NAV might rely on valuation selections (haircuts, illiquid marks, disputed belongings) and says nothing about liquidity | No: misrepresentation can exist even when a agency might theoretically pay again later | Basis for NAV declare; asset/legal responsibility definitions; valuation memos; trial report on representations | That “NAV optimistic” means “no fraud,” or that clients confronted no real-time withdrawal threat |
What this implies going ahead
If the movement’s $16.5 billion NAV declare turns into the new reference level, it shifts the FTX narrative from “huge gap” to “liquidity mismatch with eventual restoration.”
That shift has penalties past Bankman-Fried’s enchantment.
First, it demonstrates that proof-of-reserves with out corresponding legal responsibility disclosures and liquidity stress testing is incomplete. Showing that belongings exist would not show that these belongings can meet withdrawal demand when confidence breaks.
The subsequent crypto disaster will not announce itself as insolvency. It will seem as opacity plus a run-on mismatched liquidity.
Second, it alerts that regulation will converge on governance chokepoints: segregation necessities, conflict-of-interest controls, and real-time legal responsibility transparency.
The vertically built-in mannequin, the place the identical entity operates the change, holds custody, runs a buying and selling desk, and manages a enterprise fund, turns into the structural goal, not simply particular person misconduct.
Third, the petition-date valuation doctrine turns into a market-structure query. If chapter regulation systematically shifts post-petition appreciation away from clients and into the property, customers internalize the danger of custody otherwise.
That dynamic might speed up the transition to self-custody and decentralized infrastructure in future cycles.
The courtroom-versus-ledger downside
The movement finally asks: if clients find yourself financially complete underneath the chapter plan, how can the trial’s fraud narrative stand?
The reply lies in the excellence between ex submit restoration and ex ante conduct. Fraud is not erased by later solvency, any greater than a financial institution theft is undone if the cash is finally returned.
FTX’s balance sheet and FTX’s courtroom report inform totally different tales as a result of they measure various things.
The ledger asks whether or not the worth was preserved. The trial requested whether or not the principles have been adopted, the representations have been trustworthy, and the dangers have been disclosed.
The incontrovertible fact that the property recovered sufficient belongings to pay claims at petition-date values does not resolve whether or not buyer funds have been misused, whether or not governance failed, or whether or not customers have been misled concerning the security of their deposits.
The FTX case shall be remembered not for its closing restoration proportion but for exposing the hole between crypto solvency as a spreadsheet train and crypto solvency as a real-time, multi-dimensional governance query.
“Made complete” in chapter phrases can coexist with “defrauded” in criminal-law phrases. The movement’s $16.5 billion NAV declare would not dissolve that rigidity. It makes it specific.
The submit Sam Bankman-Fried requests new trial claiming FTX had $16.5 billion surplus in 2022, but does it matter? appeared first on CryptoSlate.
