FTX, a cryptocurrency exchange that filed for bankruptcy protection in 2022, has announced that it will be repaying nearly all of its customers and creditors. In a recent court filing, FTX stated that it owes approximately $11.2 billion to its creditors, but has between $14.5 billion and $16.3 billion to distribute to them. Customers and creditors who have claims of $50,000 or less will receive about 118% of their claim, covering around 98% of FTX customers. The plan also allows for supplemental interest payments to creditors at a rate of 9%.
The recovery of funds for FTX was made possible by monetizing a collection of assets, mostly consisting of proprietary investments held by Alameda or FTX Ventures businesses, as well as litigation claims. CEO and founder Sam Bankman-Fried resigned when the exchange collapsed in 2022 and was later sentenced to 25 years in prison for fraud and conspiracy. The new CEO, John Ray III, a long-time bankruptcy litigator known for his work following the collapse of Enron, expressed optimism about the plan to return 100% of bankruptcy claim amounts plus interest for non-governmental creditors.
FTX’s future remains uncertain, with discussions about potentially reviving the crypto exchange FTX.com underway. The aftermath of the collapse, including details of fraud and mismanagement, may present challenges to any potential revival. A rival crypto exchange, Binance, briefly explored acquiring FTX before its own collapse, with its founder, Changpeng Zhao, recently sentenced to prison for criminal activities on the platform. The bankruptcy court is scheduled to hold a hearing on the dispersion of FTX assets on June 25.
Investors who were trading cryptocurrency on FTX when it collapsed may have incurred significant losses, given the surge in crypto prices over the past two years. The value of bitcoin, for example, has increased from $16,080 at the time of FTX’s collapse to close to $62,675 as of the latest data, resulting in a potential loss for those who held onto their coins during the bankruptcy proceedings. Despite the challenges faced by FTX and its customers, the plan to repay creditors and customers offers some hope for resolution and recovery in the aftermath of the exchange’s collapse.
