FTX To Repay Billions To Customers

FTX has received court approval of its bankruptcy plan on Monday. This will allow it to fully repay customers and this will be using up to $16.5 billion US in assets which have been recovered since the once-leading crypto exchange collapsed. The plan is built on a series of settlements with FTX customers and creditors. Many U.S. government agencies, and liquidators have also been appointed to wind down the FTX operations outside the U.S.

The settlements allow FTX to use its assets to repay customers of its crypto exchange first. This is to be before paying potentially competing claims filed by government regulators. Also, the FTX plans to repay 98 per cent of its customers. This is also held for those who held $50,000 US or less on the exchange especially within sixty days after the plan’s effective date. However, it has not yet been determined.

FTX which was once among the world’s top crypto exchanges collapsed after news surfaced that founder Sam Bankman-Fried took customer money to pay off risky bets. These bets were made by his hedge fund, Alameda Research. This led to Bankman-Fried being sentenced in March to 25 years in prison for stealing from FTX customers, and he has appealed his conviction.

What Has The Court State With Regard To FTX?

The U.S. Judge John Dorsey has approved the wind-down plan at a bankruptcy court. This was decided on a hearing in Wilmington, Del.. This further stated that FTX’s success made it “a model case for how to deal with a very complex Chapter 11 bankruptcy proceeding.”

However, FTX remains in talks with the U.S. Department of Justice over $1 billion US. This is the amount that the government seized during the criminal prosecution of Bankman-Fried. Plus, the FT shareholders, who would normally receive nothing in a bankruptcy proceeding, could receive up to $230 million US. This would be paid from the funds seized by the DOJ, as stated according to the court documents.

The FT firm has also estimated that it will have between $14.7 billion and $16.5 billion US. This will be available to repay creditors, enough to pay customers. This will be at a level of at least 118 percent of the value in their accounts as of November 2022. This is the date that the company filed for bankruptcy.

Agencies Agree To Let Customers Be Paid First

The U.S. government agencies, including the Commodity Futures Trading Comission and Internal Revenue Service, agreed to let FTX prioritize customer repayment. This was decided over fines and tax debts. Plus, a liquidator appointed in the Bahamas agreed to work with FTX too. This was after previously challenging the company’s authority to file for bankruptcy in the U.S.

FTX said that the result was a victory for creditors. This was made possible by its ability to recover cash and crypto assets that had gone missing during the company’s chaotic collapse. The company also raised additional funds. This was done by selling off other assets, including its investments in tech companies like the artificial-intelligence startup Anthropic.

“Today’s 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 FTX’s books from the ground up and from there marshaling assets from around the globe,” FTX CEO John Ray said in a statement on Monday.

Are The Customers Satisfied With The Plan of FTX?

Customers have had a mixed response to the plan. Many people have been expressing a lot of disappointment about FTX’s demise. This was bad as it caused them to miss out on a strong rebound in crypto prices. This happened since the market bottomed out in 2022. Some customers had strongly objected to the plan. This led them to go forward and demand higher repayments reflecting recent rises in cryptocurrency values.

David Adler, an attorney went on to represent four objecting creditors. He further said that the price of a bitcoin, for example, has risen to over $63,000 US from its November 2022 price of $16,000 US. Plus, customers that deposited bitcoin on FTX’s exchange are finding it difficult to accept FTX’s claim. This is especially related to those of them receiving a 100 per cent recovery based on those lower prices of two years ago, Adler said.