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FTX Lawyers Ask Court to Nullify “Sam Coins” Ahead of Sam Bankman-Fried Sentencing

Last Updated March 27, 2024 11:55 AM
Giuseppe Ciccomascolo
Last Updated March 27, 2024 11:55 AM

Key Takeaways

  • Collapsed exchange FTX is trying to get a judge to dismiss claims regarding three digital tokens nicknamed “Sam Coins”.
  • FTX hired experts who concluded the tokens are worthless.
  • But a group of investors holding these tokens believe they deserve compensation.

Amid its legal struggles, cryptocurrency exchange FTX seeks to dismiss claims from specific investors regarding “Sam Coins” in an ongoing bankruptcy case.

During a court hearing  on March 26, legal representatives for FTX urged Delaware bankruptcy judge John Dorsey to significantly devalue customer claims related to a few digital tokens closely associated with FTX’s embattled founder, Sam “SBF” Bankman-Fried, who is currently in jail awaiting sentencing.

Creditors Fight Back

A subset of FTX Trading customers is seeking substantial compensation from the bankrupt crypto firm, asserting that three digital tokens known as “Sam Coins” merit a payout despite their close association with convicted fraudster Sam Bankman-Fried.

Investors holding tokens named Serum, MAPS, and OXY are urging US Bankruptcy Judge John Dorsey to compel FTX to increase the value of these cryptocurrencies. They challenged the company’s experts who concluded that the digital coins are of negligible worth. Court documents suggest that, before relinquishing control of FTX, Bankman-Fried initiated Serum and secured control over the other two tokens through agreements.

The customers and the company must present their final arguments to Dorsey in federal court in Wilmington, Delaware.

FTX argued in a court filing that when it filed for bankruptcy in November 2022, the company held over 95% of all tokens, well beyond what could feasibly be sold, even discounting the tokens’ association with the fraud that led to FTX’s collapse.

Lawyers Asked To Nullify “Sam Coins”

But FTX attorney Brian Glueckstein argued that customer claims for native tokens of travel platform Maps (MAPS), DeFi brokerage Oxygen (OXY), decentralized exchange Serum (SERUM), and hybrid blockchain Boba (BOBA) should be significantly discounted or reduced to zero.

However, investors assessed the value of their tokens at hundreds of millions of dollars and presented their calculations in court.

Glueckstein explained that FTX’s experts meticulously analyzed the assets’ value as of the petition date to determine a reasonable discount. Sabrina Howell, FTX’s valuation expert, concluded that due to the firm’s ownership of over 95% of the OXY and MAP tokens – previously closely linked to SBF – it would take decades to liquidate them. However, creditor attorney Kurt Gwynne contended that the company’s hired experts unfairly quoted low estimates.

FTX contended that claims associated with MAPS and OXY tokens – valued at over $600 million – should be deemed worthless. Claims linked to SERUM tokens – worth $509 million – should face a 58% discount, based on their analysis.

What’s Next?

Bankman-Fried‘s conviction for fraud underscores the crucial role played by ‘Sam Coins’ in his financial empire. Their intimate connection with Bankman-Fried not only earned them their nickname. But also positions them as key components in this intricate legal saga. His case involved misappropriation of customer assets for high-risk ventures and personal enrichment.

The Department of Justice and the defense team must consider the recommended sentence. Judge Lewis Kaplan has tentatively scheduled a hearing on March 28 to discuss the proposed sentence. He set deadlines for both parties to respond to the memo before that date.

Additionally, it’s important to note that Bankman-Fried is facing further charges, including fraud against FTX customers related to derivatives.

Although last year’s conviction did not include a count of conspiracy to commit commodities fraud, Bankman-Fried also faces charges of securities fraud against FTX investors, conspiracy to commit bank fraud, conspiracy to operate an unlicensed money transmitter business, and conspiracy to violate the Foreign Corrupt Practices Act.

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