In a remarkable turnaround, customers of the now-bankrupt cryptocurrency exchange FTX are set to recover more than 100% of their funds lost during the platform’s shocking collapse in November 2022.
The FTX bankruptcy estate has proposed a reorganization plan that would see nearly all creditors paid back 118% of their claims in cash within 60 days of court approval.
TLDR
- FTX’s bankruptcy estate plans to pay back nearly all creditors 118% of their claims in cash within 60 days of court approval.
- The $14.5 – $16.3 billion cash pile is the result of selling off FTX’s investments and assets, not from the recent crypto market recovery.
- The plan settles claims from government agencies like the IRS and CFTC, with the IRS receiving $200 million and a subordinated $685 million claim.
- Sam Bankman-Fried had argued that customers would be repaid in full, but the estate says this does not excuse his criminal conduct.
- Most creditors with claims under $50,000 will receive 118 cents on the dollar, while larger creditors will get at least 100 cents on the dollar plus interest.
The plan, filed in the Delaware bankruptcy court on Tuesday, details how the FTX estate has amassed a staggering $14.5 to $16.3 billion in cash through the sale of investments and assets previously owned by FTX and its affiliated trading firm Alameda Research.
This cash pile represents a monumental effort by current FTX CEO John J. Ray III and his team to recover funds scattered across the globe in the wake of the exchange’s implosion under the leadership of founder Sam Bankman-Fried.
Notably, the estate clarified that the recent rebound in cryptocurrency prices has not been a driving factor behind the substantial recovery.
Prior to the bankruptcy filing, FTX was essentially emptied of nearly all customer cryptocurrency holdings, leaving the estate unable to benefit from the market’s resurgence.
Instead, the cash has primarily been generated through the sale of venture capital investments made by FTX and Alameda, including an 8% stake in AI startup Anthropic that was sold piecemeal to institutional investors for $884 million in March.
Other sources of value, such as funds clawed back from former FTX executives and affiliates, have also contributed to the sizable recovery pool.
Under the proposed plan, 98% of creditors, comprising those with claims of $50,000 or less, would receive 118 cents on the dollar within two months of court approval.
The remaining creditors would get at least a full recovery of their claims, plus up to 9% interest to compensate for the time value of their investments.
The plan also settles several government claims, including a $24 billion claim from the Internal Revenue Service (IRS) that would be resolved through a $200 million cash payment and a $685 million subordinated claim payable after other creditors.
The U.S. Commodity Futures Trading Commission (CFTC) and other government agencies have also agreed to subordinate their claims, provided FTX users and investors are paid in full with interest.
The proposed payouts stand in stark contrast to the initial aftermath of FTX’s collapse, when customers feared they might never recover their funds.
At the time, Bankman-Fried attempted to downplay the harm caused by FTX’s implosion, arguing that customers would ultimately be made whole.
However, the FTX estate has firmly rejected this notion, stating that Bankman-Fried’s ability to pay back victims “doesn’t mean his conduct wasn’t criminal.” Bankman-Fried, who was convicted of fraud and sentenced to 25 years in prison in March, plans to appeal his conviction and sentence.
While the proposed plan represents a significant victory for FTX’s creditors, it is important to note that the recoveries are based on cryptocurrency prices at the time of the bankruptcy filing in November 2022.
This means that customers will not benefit from the recent surge in crypto prices, which has seen Bitcoin reach new record highs above $60,000.
