What is becoming harder and harder to justify in the never-ending FTX litigation is the glaring mismatch between an outdated bankruptcy system, the wild volatility of the crypto market, and the perverse incentives that mismatch has created. U.S. bankruptcy law was written decades before crypto even existed. It was built for old-school corporate collapses involving relatively stable assets, not decentralised tokens that can gain or lose billions in a matter of weeks. Yet those same rigid rules are now being forced onto one of the most extraordinary financial implosions in modern history, producing an outcome that may be technically lawful, but feels deeply warped in practice.
There is now more than $12.5 billion available for redistribution, and the restructuring is expected to return between 119% and 143% of customer claims. In other words, creditors are not simply being made whole; they are being paid back and then some. But that is exactly where the scandal begins. They should not be getting more than they lost, because the “surplus” making this possible is not some harmless bonus. It is the fuel keeping the liquidation machine roaring on. Instead of winding the process down once customers are covered, the excess cash is being used to bankroll the liquidators’ continuing work and, crucially, to fund fresh waves of litigation against innocent third parties who dealt with FTX in ordinary commercial good faith.
Despite customers already being overcompensated, the estate is still aggressively chasing individuals and companies that transacted with FTX, including Anthony Scaramucci, Sasha Ivanov, Michael Kives and Bryan Baum, demanding the return of funds or digital assets transferred in ordinary commercial circumstances.
The dragnet has even reached charities. The FTX estate has sued several non-profit organisations linked to the Effective Altruism movement, trying to claw back donations originally made by FTX and Alameda. Money that was given away as philanthropy is now being hauled back through the courts, even though creditors are already expected to recover more than they lost. That raises an uncomfortable question: are these lawsuits really about helping victims, or are they simply about making an already bloated estate even bigger?
For those now in the firing line, the issue is no longer just legal, but moral. What exactly is the point of these relentless recovery actions once creditors have already been fully compensated? At this stage, the real-world effect of the litigation is not to plug some hole in customer restitution. It is to swell an already overfunded estate, which can then keep paying the professionals running it.
The legal engine behind many of these claims is found in avoidance and clawback rules, which allow a bankrupt company to unwind transactions made before insolvency if they did not provide “reasonably equivalent value.” Those rules were designed to stop asset stripping and shady last-minute transfers in traditional corporate failures. They were never built for fast-moving crypto markets, where token transfers, liquidity provision, and investment agreements are ordinary commercial behaviour, and where valuations can swing dramatically between the date of a deal and the date of bankruptcy. Yet the law freezes value at the moment of insolvency while the market continues to lurch violently afterward. That mismatch changes everything: who benefits from volatility, and who ends up paying for it.
In FTX’s case, soaring crypto prices and successful recoveries have created an estate far bigger than anyone first imagined. Ironically, the same volatility that helped drive the collapse has also supercharged the recovery. But because the law pushes administrators to chase every possible recovery, surplus funds do not slow the litigation frenzy; they turbocharge it. Professional fees have already neared $1 billion, and performance-based rewards have become part of the public debate, including a proposed $41 million payment to chief executive John J. Ray III for overseeing the process. In a system like this, litigation starts to feed itself: the more claims pursued, the bigger the pot; the bigger the pot, the more “work” there is to do; and the more work there is, the more fees can be racked up.
This is where the whole affair starts to look less like creditor protection and more like a money-making exercise. Creditors being paid “119% to 143%” becomes the shiny headline used to legitimise a surplus that can then bankroll more lawsuits and more liquidator profit. Once that cycle starts, it creates the unmistakable impression that the estate is no longer being run chiefly for victims, but for the professionals controlling it. Put bluntly: once customers are paid in full, extra recoveries stop looking like justice and start looking like a business model.
Crypto volatility makes the problem even worse. A large chunk of the estate is still exposed to market swings, meaning its value can shoot up or plunge fast. That creates enormous pressure to turn claims into cash through litigation, locking in value while it can. In practice, the strategy stops being about compensating victims, because that has already been achieved, and starts being about protecting the administrators’ ability to keep drawing fees from a volatile pool of assets. In that context, suing more counterparties looks less like fairness and more like preserving the financial momentum of the liquidation itself.
And that is the heart of the problem. The law assumes static value and a straightforward insolvency process. Crypto is neither static nor straightforward. When bankruptcy rules built for an analogue financial world are mechanically imposed on digital assets, the result may be legally defensible, but economically and morally out of sync. In a case where creditors are already being paid more than they are owed, and should not be, the continued targeting of counterparties starts to look like institutionalised overreach: innocent third parties dragged into court to enlarge an estate whose excess mainly keeps the liquidators in business.
The duty to maximise the estate, conceived in a pre-crypto age, is now colliding with the very purpose it was supposed to serve. Instead of preserving value for creditors, endless litigation risks eroding trust, inflating costs, and turning volatility into a weapon. Until the law catches up with the realities of digital assets, cases like FTX will keep exposing the gulf between outdated legal design and modern financial chaos.
And in that gulf, more and more counterparties are being sued. Not because creditors are still out of pocket, but because the surplus has made the whole process far too lucrative, and the people in charge have every reason to keep the show going.