FTX, the cryptocurrency exchange that collapsed in November 2022, has filed a new reorganization plan that proposes to repay nearly all account holders in full for their claims. FTX revealed that it had recovered around $15 billion, primarily from selling venture capital investments, which is more than enough to cover the losses of almost all creditors with claims of $50,000 or less. The remaining creditors will also receive a significant recovery, with a minimum payout of 118% of their claims. This unexpected windfall for account holders goes beyond simply repaying creditors and may also include additional compensation to account for the time value of money lost since FTX’s bankruptcy.
The proposed reorganization plan by FTX includes potential additional compensation for account holders, meaning they may not only get their money back but also receive interest on it. This rare occurrence of full repayment to over 2 million customers is a significant improvement from typical US bankruptcy cases, where creditors often receive only a fraction of what they’re owed. Some creditors could see a return of up to 142%, which means they would get back more than they originally lost. FTX’s payout plan has exceeded initial expectations, as the company initially anticipated returning just 90% of customer funds, but now expects full repayment for customers.
FTX is expected to have a significant surplus of cash, around $16.3 billion, after selling all its assets. This surplus is more than enough to cover what it owes to customers and other non-government lenders. The company has been aggressively selling off its assets, including investments made by FTX and its affiliate, to raise the necessary funds to repay creditors. The proposed distribution plan, which is contingent upon formal approval from the Delaware bankruptcy court, includes the sale of investments like an 8% stake in AI startup Anthropic, which was sold for $884 million to institutional investors in March.
The new reorganization plan by FTX is a positive development for account holders who may receive a full repayment for their claims, and even additional compensation. The plan’s implementation is subject to approval by the Delaware bankruptcy court, and a disbursement of funds to creditors and account holders is likely a few months away. Despite the unexpected windfall for account holders, FTX has been able to raise enough funds through asset sales to cover what it owes to customers and other non-government lenders. Overall, the proposed reorganization plan is a significant improvement from initial expectations and offers hope for justice for FTX victims.
