FTX, which used to be one of the top crypto exchanges, had its bankruptcy plan approved on Monday, with repayment of customers at the top of the list. (Dado Ruvic/Illustration/Reuters)
FTX has gained court approval for its bankruptcy plan, enabling it to repay customers with up to $16.5 billion in recovered assets following the collapse of the crypto exchange. The plan, approved on Monday, involves settlements with customers, creditors, U.S. government agencies, and liquidators handling FTX's non-U.S. operations.
These settlements prioritize customers, allowing them to be paid before addressing claims from government regulators. FTX plans to repay 98% of customers—those with $50,000 or less—within 60 days of the plan's yet-to-be-determined effective date.
Once a top global crypto exchange, FTX's downfall began when it was revealed that founder Sam Bankman-Fried misused customer funds to cover risky bets made by Alameda Research, his hedge fund. Bankman-Fried was sentenced to 25 years in prison for stealing from customers, a conviction he has since appealed.
U.S. Judge John Dorsey approved the bankruptcy plan during a hearing in Wilmington, Delaware. He praised the plan, calling it a "model case" for handling a complex Chapter 11 bankruptcy.
FTX is still negotiating with the U.S. Department of Justice over $1 billion seized during Bankman-Fried’s prosecution. According to court filings, FTX shareholders could receive up to $230 million from the seized funds, a rare occurrence in bankruptcy cases.
The company has estimated that it will have between $14.7 billion and $16.5 billion available for creditors. This amount is expected to cover at least 118% of customers' account values as of November 2022, the month FTX filed for bankruptcy.
Various U.S. agencies, including the Commodity Futures Trading Commission and the IRS, have agreed to let FTX prioritize customer repayments over government fines and taxes. Additionally, a liquidator in the Bahamas, who had previously challenged FTX’s bankruptcy filing, has now agreed to cooperate.
FTX has made significant progress by recovering cash and cryptocurrency that disappeared during its chaotic collapse. The company also raised funds by selling off assets, including its investments in tech startups like Anthropic.
FTX CEO John Ray credited the recovery efforts to the dedication and expertise of the team working on the case. In a statement, he emphasized that their work had recovered billions of dollars globally.
However, customers have had mixed reactions. Some are unhappy with the plan, pointing out they missed out on the recent rebound in cryptocurrency prices. David Adler, a lawyer representing objecting creditors, highlighted that the value of bitcoin has surged to over $63,000, compared to $16,000 at the time of FTX’s collapse. FTX has stated that returning the exact crypto assets is impossible, as they were misappropriated by Bankman-Fried.
