Court greenlights FTXs $16.5 billion bankruptcy plan to repay defrauded customers
Defunct crypto exchange FTX received court approval for its bankruptcy plan and its estate is now clear to repay customers in cash, with interest, using up to $16.5 billion in recovered assets, Reuters reported Oct. 7.
The plan
US Bankruptcy Judge John Dorsey approved the plan, which includes creditors from over 200 jurisdictions, during a hearing in Wilmington, Delaware. The plan relies on settlements made with FTX customers, creditors, US government agencies, and international liquidators.
The approved plan prioritizes FTX customers, enabling the exchange to repay their claims first, ahead of competing claims from government regulators. Authorities estimate the FTX collapse left around 9 million customers and investors facing substantial financial losses.
Reimbursements
According to a statement shared by the company state, 98% of FTXs customers will receive nearly 119% of their account value as of November 2022.
The repayment process will start within 60 days after the plan comes into effect. However, debtors in Chapter 11 bankruptcy filings will separately announce the first distribution date of the assets they currently hold.
Alex Thorn, head of research at Galaxy, stated that roughly $1.1 billion will be distributed this year to creditors whose claims are below $50,000. The remainder will be paid between the first and second quarters of 2025.
FTX noted that the outcome was made possible by its recovery of the assets lost during the companys collapse.
FTX CEO John J. Ray III said in the statement that the plans approval is a significant milestone. He added:
Todays achievement is only possible because of the experience and tireless work of the team of professionals supporting this case, who have recovered billions of dollars by rebuilding FTXs books from the ground up and from there marshaling assets from around the globe.
Payment with interest
Although the total value recovered could be as high as $16.5 billion, the amount could fall to $14.7 billion after its cash conversion. Additional funds were also raised through asset sales, including stakes in technology firms like the AI startup Anthropic.
Ray highlighted that all bankruptcy claim amounts will be returned with interest, except for non-governmental creditors.
Notably, the repayments are in cash, since FTX stated that returning the original crypto was not feasible as the assets had been misappropriated by the exchanges founder, Sam Bankman-Fried (SBF).
SBF was sentenced to 25 years in prison for defrauding FTX customers. However, he filed an appeal on Sept. 13, claiming that the trial was riddled with misconduct.
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Text source: CryptoSlate
