Former SEC Official Calls FTX Case The Largest Scandal In Crypto World

The FTX crypto exchange founded by Sam Bankman-Fried is the biggest crypto scandal case in the history of digital assets. (Photo; Doc. CoinMarketCal)

JAKARTA - The FTX crypto exchange, which was once the second largest exchange in the world, is now facing bankruptcy after it was revealed that it had leaked finances amounting to USD 8 billion (IDR 125.6 trillion) in its balance sheet.

The plan to restructure the exchange failed completely, after no investor was willing to invest. Former United States Securities and Exchange Supervisory Agency (SEC) official John Reed Stark has strongly criticized the bankruptcy process of FTX, calling it a "traud by street robbers."

Stark, who once served as head of the SEC cyber law enforcement unit, wrote an article on X, a crypto news site, criticizing the FTX's bankruptcy team. He alleges that the team knew restructuring FTX was impossible, but still took advantage of the situation to take advantage of FTX customers and creditors.

According to Stark, FTX is supposed to file for bankruptcy chapter 7, which means total liquidation of its assets is used to pay off debt. However, FTX instead filed for bankruptcy chapter 11, which means its business reorganization in the hope of being able to operate again. Stark said that Chapter 11's plan is just a "pure imagination" that has neither legal nor economic basis.

Stark also revealed that FTX has paid very high fees to experts involved in the bankruptcy filing process, such as lawyers, consultants, and auditors.

He mentioned that FTX had paid more than 121 million US dollars (Rp 1.9 trillion) in costs between February 1 and April 30, with law firm Sullivan & Cromwell receiving more than 30% of that amount. Stark criticized the costs spent by the bankruptcy team, saying they had "depleted" the remaining FTX assets.

Stark also highlighted the role of Sam Bankman-Fried, founder and former CEO of FTX, in the scandal. He alleges that Bankman-Fried has committed market fraud and manipulation through his crypto trading company, Alameda Research, which has close ties to FTX. Stark said that Bankman-Fried has used FTX assets for its personal and business interests, regardless of the interests of FTX customers and creditors.

Stark concludes the FTX scandal as "one of the biggest financial scams in American history." He compared FTX with Enron and Madoff, two of the most famous financial fraud cases that caused huge losses to investors. He also warned that the FTX scandal could have a negative impact on the crypto industry as a whole, and asked the SEC to take immediate action.