Sam Bankman-Fried, known as SBF, built the cryptocurrency exchange FTX and trading firm Alameda Research. He promised customers safe custody, but court-established findings show that he used their funds for other purposes too. FTX’s collapse led both to criminal proceedings and efforts to recover assets for creditors. These paths are connected, but answer different questions: who broke the law, and how much money will actually come back.
FTX was a marketplace where customers bought and sold cryptocurrencies. Alameda Research was a trading firm taking its own positions; on FTX it also offered to buy and sell, helping others find a counterparty. Bankman-Fried stood on both sides of this relationship. According to the appellate court, he led FTX from its founding in 2019 until November 2022, and Alameda from 2017 until 2021. He held substantial ownership stakes and control in both. Leaving Alameda’s day-to-day leadership therefore did not by itself separate his interests from its business. [1]
When you entrust money to an exchange, its app shows a balance and you expect to be able to withdraw it. Account access is not the same as holding your own private keys, which sign bitcoin transfers. At FTX, Alameda had a large credit line: it could draw funds even with a negative balance. The fraud was not the negative balance itself, but using customer money outside the promised limits and concealing that use. Funds went, for example, to repay Alameda’s debts. A customer could still see a number on screen while the money served another purpose. Self-custody reduces this dependence on a company, but puts responsibility for keys and backups on their holder. [2] [1] [5]
A jury found Bankman-Fried guilty on seven counts involving fraud and related conspiracies. On March 28, 2024, Judge Lewis A. Kaplan sentenced him to 25 years in prison and three years of supervision after release. The case involved customers’, investors’ and lenders’ money. According to the Justice Department, he promised to keep customer deposits separate while directing them to Alameda and hiding the reality through misleading information. This was more than an entrepreneur losing a trade during a market downturn. The court addressed specific fraudulent conduct, not people’s guilt for using cryptocurrencies. [2]
The US Court of Appeals for the Second Circuit affirmed the judgment on June 12, 2026. Bankman-Fried argued, among other things, that investments might eventually gain value and customers be compensated. The court rejected that possibility as a defense undoing the fraud. The point is understandable without legal jargon: a later repayment does not retrospectively authorize obtaining money through deception and using it differently from what was promised. This appeal therefore has a specific decision. The document alone does not establish that every further possible legal remedy has been exhausted. [1]
Alongside imprisonment, the court ordered forfeiture of over 11 billion USD. This is a measure in criminal proceedings to strip away financial proceeds; the Justice Department also reports authorization to use recovered funds to compensate victims. But an ordered amount is not the same as assets already located and recovered. Nor are recovered assets a customer’s bank statement confirming receipt. Bankruptcy proceedings run alongside this, addressing claims against the failed businesses. Both routes may contribute to compensation, but their amounts and individual steps must not be confused. [2]
After bankruptcy, a customer is no longer dealing only with an ordinary exchange withdrawal, but with a claim: an asserted entitlement to recover a certain value. For digital assets, FTX describes a calculation using a court-approved conversion table. Each asset’s quantity is multiplied by its table price, and the results are added together. This provides a basis for valuing the claim, not a continuously updated BTC market price. An estimate displayed in the portal also does not by itself confirm an awarded or received distribution. Whenever you read a recovery percentage, you therefore need to know the value it is measured against. [3]
Take a purely arithmetic example: an allowed claim is 100 USD and the person receives 110 USD. That is a payment of 110% of the claim. The calculation is correct, but measures dollars against a dollar baseline. It does not say how much BTC the money can buy, because that depends on the price when buying. If bitcoin has risen meanwhile, a higher percentage of the dollar claim may not buy the original quantity of coins. This is not an actual FTX distribution rate or a promised return. It simply shows why recovered money, bitcoin quantity and valuation date need to be distinguished. [3]
The FTX overview updated in September 2026 distinguishes allowed and disputed claims. A disputed claim may, for example, still be under review; that status is not automatically a final rejection. Allowance alone does not complete payment either. Identity verification, tax information, jurisdiction and acceptance by the service provider distributing funds also matter. Conditions and deadlines belong to the particular proceedings and claim. Bankman-Fried’s conviction does not replace them. A report about a large aggregate distribution can therefore be true without saying whether a particular customer has received any money. [4]
For the clearest picture, read this entry together with Counterparty risk, Proof of reserves, Liabilities. The reverse links also lead from FTX Collapse.