(Bloomberg) — A small group of FTX Trading customers are demanding hundreds of millions of dollars from the bankrupt crypto firm, claiming that three digital tokens known as “Sam Coins” deserve a payout even though they are closely associated with convicted fraudster Sam Bankman-Fried.
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Investors who hold tokens called Serum, MAPS and OXY are asking US Bankruptcy Judge John Dorsey to force FTX to raise the value of the crypto by overruling company experts who concluded the digital coins are nearly worthless. Before he gave up control of FTX, Bankman-Fried created Serum and cut deals to get control of the other two tokens, according to court papers.
The customers and the company made their final arguments on Tuesday in federal court in Wilmington, Delaware. Dorsey did not say when he would issue a ruling.
The judge questioned both sides about the central issue in the dispute: how to value crypto currencies.
Unlike property or stock, tokens “have no inherent value,” Dorsey said. “Here, the only value is derived from the trades themselves. As far as I can tell, crypto currency trades on sentiment and nothing else.”
When FTX filed bankruptcy in November 2022, the company held more than 95% of the disputed tokens, far more than could ever be sold, even if the coins had not been tainted by the fraud that caused FTX to collapse, the company argued in a court filing.
Company advisers have asked the judge to approve their estimate that two of the coins are worth nothing and the third only pennies.
Holders say that estimate is flawed and in court on Monday presented their own method for calculating the tokens value. Under their approach, the crypto coins should be worth hundreds of millions of dollars. They have filed claims demanding they be paid based on their calculations.
The company hired experts to put a value on the tokens, but took steps to ensure the estimates were as low as possible, creditor attorney Kurt Gwynne told Dorsey.
“Every instruction from FTX was designed to suppress the value,” he said.
Other former FTX customers are likely to get back 100% of what they had on the trading platform when it was put into bankruptcy, company lawyers say. That’s because those customers invested US dollars, Bitcoin and other assets that still have value today.
FTX has about $6.4 billion in cash, the company has said.
Last year, Bankman-Fried was convicted of fraud for wrongly transferring customer assets to a hedge fund he controlled. The money was then used for risky investments, political donations and expensive real estate before the FTX empire collapsed.
The “Sam Coins” played an important role in that scheme, bankruptcy officials argue. Although the tokens had their own names, they were known among crypto enthusiasts as “Sam Coins” because they were so closely associated with Bankman-Fried.
The case is FTX Trading Ltd., 22-11068, US Bankruptcy Court for the District of Delaware.
(Adds comments from judge in the fifth paragraph.)
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