Lawyers talk about the current situation, causes and subsequent events of FTX victims in Taiwan

Note: The author has no commercial relationship with the interviewee

So far, among the clients we have accepted, there are about 950 people in Taiwan, and about four people have lost more than 5 million US dollars. The total amount of damage may exceed 150 million US dollars. 90% are individual victims/retail investors. There are about 30 people in mainland China, and there is one victim who lost more than 5 million US dollars.

When Lehman went bankrupt, the total number of victims in Taiwan exceeded 50,000, and the total amount exceeded 2 billion US dollars. We guess that the number of victims in Taiwan this time may be even greater. Previously, Lehman's liquidation took three years and recovered about 30% of the funds. We estimate that it may take a similar three years for FTX to complete the bankruptcy liquidation, and the goal is to recover 30% of the funds (although it is more complicated and difficult).

Compared with other exchanges, some Taiwanese prefer to use FTX, probably because they think that FTX is the only exchange founded by people who are not from mainland China (worry about personal information leakage). In addition, local partners and ambassadors in Taiwan have also carried out very effective promotion. FTX is also very convenient for deposits and withdrawals in Taiwan, which led to more victims in Taiwan in this FTX crash.

More importantly, FTX has launched an interest-bearing product for USD stablecoins with an interest rate of 8%, which is very popular in Taiwan. The interest rate for bank deposits in Taiwan is almost 0, and the interest rate for mortgages and credit loans is only about 3%, which has led to the widespread popularity of this product. Some people even borrow money from banks and deposit it in FTX for arbitrage. One problem with this is that if users deposit coins in FTX for financial management, FTX has the right to use it for transactions and processing, and also states that they may suffer losses, so they may be at a different level and position in the final liquidation.

The FTX case has now entered the US judicial process, so for creditors, if they want to get compensation, the best strategy is to follow the US judicial process and apply to the court to participate in the bankruptcy process and distribute the property. This is the goal our firm is currently working towards. They may soon form a creditor group, and then there will be a bankruptcy committee, a bankruptcy administrator for the debt, and a reorganization plan.

For Taiwan’s competent authorities, FTX is, after all, an exchange located overseas. For Taiwanese investors, they go online to make related investments or transactions. These transactions do not actually take place in Taiwan. Although they are related to Taiwanese investors, Taiwan’s regulatory authorities are unlikely to intervene in the follow-up. Even the United States, its administrative departments are unlikely to interfere with the operation of the courts.

For different creditors, which one has a higher priority? Some specific claims will be listed as priority claims. For example, the remuneration of the bankruptcy administrator, court-related expenses, employee salaries, funds related to employee rights, etc., these will also be liquidated first. Most of the others are ordinary claims. In basic principle, as long as you have declared a claim to the court, in principle, the claims should be divided equally.

FTX has more than 100 subsidiaries in the entire group, and its exact assets may not have been properly investigated. If it enters the so-called bankruptcy reorganization (non-liquidation) stage, in fact, its compensation to investors will definitely not be 100%, and there will definitely be a discount. The final proportion will be negotiated. Of course, if the final bankruptcy reorganization plan it proposes is too unfriendly to creditors, it may not be accepted.

Whether SBF, FTX employees, their promoters, community representatives, etc. will be held criminally liable depends on whether they are aware of the company's internal decisions and whether they are aware of them subjectively. Only then can we further discuss whether there is the possibility of criminal prosecution.

Finally, for victims, we suggest that if the loss is less than 10,000 US dollars, it is not necessary to find a lawyer. If the loss is more than 100,000 US dollars or even more, you may consider accepting the help of a lawyer. After all, the case is relatively complicated and it is difficult to complete it independently without the assistance of professionals.

Currently, many people suggest taking screenshots of their assets in FTX so that they can prove the amount of their assets in FTX in the future. Active evidence collection is a good thing, but it needs to be effective. Screenshots are not the best way because they are too likely to be tampered with or fabricated by humans, and their evidence track is not accurate. In my own actual experience, after applying for a withdrawal from FTX, I will receive a letter of withdrawal application, which is relatively reliable. If you use Google Mail, you can further put the letter into Google Vault. In addition, please save the previous on-chain records of deposits and withdrawals to FTX.

Because FTX is a centralized exchange, all transaction records are based on its internal ledgers. We can only hope that FTX will not delete or tamper with the ledgers. Otherwise, it will be in a desperate situation during the court trial, just like the Bibao case, which left Taiwanese investors penniless.

In addition, we advise investors to abandon all irrational thoughts and be careful of those who may try to make money or defraud others under various pretexts.