Kenneth Feinberg, American Attorney and Former Administrator of the September 11 Victim Compensation Fund, joins Yahoo Finance Live to assess what to expect in FTX's upcoming bankruptcy case and how creditors will be examined.

Video Transcript

- Attorney General Merrick Garland announcing he's appointing Jack Smith, an International Criminal Court prosecutor, as special counsel to lead two criminal investigations involving former President Donald Trump. Now, here's how the attorney general described those investigations.

- The investigation into whether any person or entity unlawfully interfered with the transfer of power following the 2020 presidential election or with the certification of Electoral College vote held on or about January 6. The special counsel will also conduct the investigation involving classified documents and other presidential records as well as the possible obstruction of that investigation.

- The attorney general went on to say he was confident that the appointment would not slow down the speed of the investigations. Seana.

- All right. FTX's bankruptcy leaving more than a million creditors wondering if they will ever see their funds again. Joining us now to explain what might happen next for those former FTX customers is an attorney who's seen many of these types of cases before-- Ken Feinberg, a former administrator of the September 11 Victim Compensation Fund. Ken, it's great to have you here on the program. So I guess, first, just your reaction to what we've seen from the FTC's fallout, how complicated this case is, and what you think this potentially means for those victims, the 1 million creditors that are on the hook.

- Well, it is complicated, and it's rather unique. Because in the FTX bankruptcy, there are two questions that are front and center. What is the value of the asset in bankruptcy? Trying to determine the liquidated value of FTX subject to distribution to creditors, I think, is going to be a rather unique challenge. Secondly, you mentioned over a million creditors lost their value in the company.

How many of those creditors can demonstrate a loss? Are they going to really come forward, give their name, give their address, designate the amount of the loss, prove that loss in a currency that is very, very opaque? So it's going to be an interesting bankruptcy going forward, both in terms of asset value in the bankruptcy and determining who is an eligible creditor entitled to a check from the bankrupt estate.

- It's certainly a complicated and unique case. Ken, just in terms of the transparency factor and the fact that the Bahamian government's involvement in this, does that further complicate what the next several months, potentially years, could look like with this case?

- Yes, potentially years. Think about it. The first step before you decide who's an eligible creditor-- you have to determine the total value of the asset that is available to the bankruptcy court for purposes of distribution. Well, that sounds like it might be a rather complex challenge, corralling all of those assets, wherever they may be, and transforming them into real dollars available in the bankruptcy court.

And then, of course, it's an international bankruptcy. I mean, you're going to have to figure out who's an eligible creditor. And will the creditors be willing to come forward? Many of them have used cryptocurrency to mask their involvement, keep their identity private, not disclose. Well, if you want to receive now part of the estate, you've got to come forward, and with sunlight, lay it on the line. I am a creditor. Here is my crypto number. Here is my loss based on what I invested. I wonder how many of those investors will be willing to come forth now.

- And Ken, you also have the investors in FTX. You have those who lost the money on the tokens as well, and then you also have some of these celebrity endorsers and trying to understand their relationship as well. As you segment these out, how do those paths actually end up playing out?

- No, the bankruptcy court will have to decide whether the endorsers are responsible. A very distinguished lawyer in this country, David Boies, has brought a class action lawsuit. He's formidable. He'll marshal his case. He'll lay out the arguments in an effort to hold others liable financially besides FX management and FX investments-- FX managers and operational people.

- And I want to ask you about the Bahamian government. If their action is successful, what does that mean for the US action and creditors and trying to claim from there?

- Lawyers will have to decide that thorny question. What happens in the Bahamas? What happens in the United States? Should there be a set-off? Who has the priority for going forward? I mean, on the one hand, it's a Bahamian company. On the other hand, it did business in 50 states here in the United States in amounts which I assume are way more excessive than any investments in the Bahamas. And I think that gives the United States Bankruptcy court plenty of argument and plenty of argument over jurisdiction.

- Ken, comparing what we're hearing from FTX to the several cases, many, many cases that you have worked on in the past, how does it stack up in terms of the complication factor of it, and in uncharted territory, it being in the crypto industry and the unfamiliarity that so many people have with that space?

- On the one hand, it's much more complicated. As I've said, you're trying to separate and finish the puzzle to try and figure out what FX means in terms of dollars and who is an eligible creditor in FTX. On the other hand, I must say, you're talking here about money. You're not talking about 9/11 lives lost. You're not talking about victims killed in the Deepwater Horizon oil rig explosion or the Boston Marathon bombings where it's death and life-altering physical injury.

I have a little bit of difficulty assuming that this complicated, very complicated FTX bankruptcy is as emotional or as wrenching as loss of thousands of lives in 9/11 or the Boston Marathon bombings or other horrible, terrific tragedies where a fund was created-- not in bankruptcy-- where a fund was created to compensate very angry and very emotionally distraught victims and their families.

- I think that's very important context to bring, and perspective. A big thank you, Ken Feinberg, for joining us this afternoon.