Cryptocurrency exchange FTX has made a surprising announcement that may bring relief to its customers. According to a court filing, almost all customers of the collapsed exchange will not only get their money back but also receive more than they initially invested.
FTX estimates that it owes creditors approximately $11.2 billion. However, the company has between $14.5 billion and $16.3 billion available to distribute to creditors. This means that customers whose claims amount to $50,000 or less will receive approximately 118% of the amount of their allowed claim. Remarkably, around 98% of creditors will receive this compensation.
The reorganization plan, which is still subject to approval by the bankruptcy court, marks a significant turning point for FTX customers. Their funds have been locked up with the exchange since it filed for bankruptcy protection in November 2022. The situation worsened when FTX’s founder, Sam Bankman-Fried, was convicted of seven criminal counts, including charges related to stealing billions of dollars from customers. He received a 25-year prison sentence.
To raise the required funds, FTX sold various assets, including venture investments held by the exchange and other investments held by Alameda, Bankman-Fried’s crypto hedge fund. One of the most notable investments FTX made was in artificial intelligence firm Anthropic, which is backed by Amazon. FTX sold most of its stake in Anthropic this year, earning nearly $900 million.
FTX faced additional challenges due to a large sum of missing cryptocurrency. Consequently, the exchange was unable to benefit from the significant appreciation of crypto prices since November 2022. Bitcoin, for example, has surged by around 270% since FTX’s bankruptcy filing.
Following Bankman-Fried’s resignation, FTX appointed John Ray III as CEO. Ray, a seasoned legal and restructuring expert, expressed his astonishment at the lack of corporate controls and trustworthy financial information within FTX. Nevertheless, he expressed satisfaction with the proposed chapter 11 plan, which aims to return 100% of bankruptcy claim amounts plus interest for non-governmental creditors.
The reorganization plan, if approved, could bring much-needed relief to FTX customers and mark a significant step towards recovery for the once troubled exchange.
(Source: NYT | Washington Post | Bloomberg)
