Behind the FTX Lawsuit Cancellation: Lawyers Earn $650,000, While 95 Million Investors Lose Everything

A recent class-action lawsuit involving FTX in Canada has been dismissed, which should have been an opportunity for investors to recover their losses, but instead turned into a satirical legal drama. The legal team received $650,000 in attorney fees, while investors received not a penny. This case highlights the harsh reality faced by crypto industry investors in legal accountability.

Lawsuit Dismissed, Investors Still Waiting for Compensation

Key Information About the Event

This class-action lawsuit targeted the Ontario Teachers’ Pension Fund. The fund had invested $95 million in FTX, and the lawsuit accused it of failing to conduct proper due diligence on the investment. On the surface, this appears to be a reasonable claim: fund managers should have been able to recognize the risk signals associated with FTX.

However, after the lawsuit was dismissed, the situation became more complicated. Although the specific reasons for the dismissal have not been disclosed in the news, the outcome is clear: claimants received no compensation, while the attorneys received $650,000 in fees.

Data Comparison: Who Profits

This comparison alone reveals the problem. Investors lost $95 million, lawyers profited $650,000 from the lawsuit, but ultimately, investors received no compensation.

Why Is Legal Accountability So Difficult?

Challenges in Canadian Litigation

As institutional investors, the Ontario Teachers’ Pension Fund should theoretically have stronger legal standing and resources to pursue accountability. But the dismissal of this lawsuit shows that even large funds find it difficult to recover losses related to FTX through legal channels.

In comparison, similar situations exist in the U.S. market. According to recent reports, former FTX customers have initiated similar lawsuits against FTX shareholders in the United States, indicating that investors are attempting legal accountability across multiple jurisdictions, but the outcomes remain highly uncertain.

Criminal vs. Civil Realities

It is worth noting that FTX founder Sam Bankman-Fried (SBF) was convicted in 2023 on charges including embezzlement of customer funds and financial fraud. Criminal cases have clear outcomes, but civil liability faces many obstacles.

According to the latest reports, former President Trump has explicitly stated he will not pardon SBF, meaning SBF’s criminal responsibility will not be altered by political factors. However, this does not directly help investors in civil cases recover their funds. Criminal convictions and civil compensation are two parallel tracks: the former establishes the fact of a crime, while the latter involves complex legal procedures such as bankruptcy liquidation and asset recovery.

The Harsh Reality for Investors

Why Was the Lawsuit Dismissed?

Although the news did not specify the reasons for dismissal, from legal practice, possible reasons include:

• Procedural obstacles (such as jurisdiction issues)
• Difficulties in establishing facts (e.g., how to define “proper due diligence”)
• The defendant’s bankruptcy status making recovery difficult
• Mismatch between litigation costs and expected benefits

Regardless of the reason, the outcome points to a harsh reality: investors find it very difficult to effectively recover losses through legal means.

Personal Perspective

From this case, it is clear that legal risks for crypto investors are much higher than in traditional finance. On one hand, the industry itself suffers from inadequate regulation, leaving investors with relatively weak legal protections; on the other hand, even if lawsuits are filed, the complexity and uncertainty of legal procedures are high. Lawyers can profit from litigation, but investors may end up with nothing.

Industry Lessons

The Importance of Due Diligence

The original intention of this lawsuit—demanding that institutional investors conduct proper due diligence—is correct. But the outcome shows that even if the lawsuit succeeds, investors are unlikely to receive compensation. This serves as a reminder that proactive risk management is far more important than legal accountability after the fact.

When the Ontario Teachers’ Pension Fund invested in FTX, it should have conducted in-depth assessments of the exchange’s operational risks, founder background, financial transparency, and more. But evidently, none of this happened, or the evaluation was insufficient.

Future Prospects for Civil Liability

Based on current information, similar lawsuits against FTX shareholders are ongoing in the U.S. market. The success of these lawsuits depends on multiple factors: legal jurisdiction, progress in bankruptcy proceedings, the possibility of asset recovery, etc.

It is reasonable to expect that the outcomes of these lawsuits will also be uncertain. Investors should prepare for a long wait and also recognize the reality: even if they win the lawsuit, the recovered funds may be far less than the original investment.

Summary

The dismissal of the FTX lawsuit reflects the legal difficulties faced by crypto investors. The phenomenon of lawyers profiting while investors receive no compensation is not an isolated case but a manifestation of the industry’s incomplete legal framework.

The key takeaways for investors are threefold: first, proactive risk management is more critical than legal recourse after the fact; second, even if lawsuits are filed, the probability of ultimately receiving compensation is very low; third, when making large investments in the crypto industry, investors should have a full understanding of the risks and not rely solely on legal remedies.

For the industry, the lesson is that the crypto market needs more comprehensive investor protection mechanisms, rather than leaving all risks to be addressed through post-failure lawsuits. This requires regulatory improvements and greater self-discipline among industry participants.