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FTX Customers To Recover Their Funds After Catastrophic Crypto Collapse
FTX says almost all of its customers will get the money they’re owed, two years after the cryptocurrency exchange’s implosion, and some will get more than that.
FTX said in a court filing late Tuesday that it owes creditors about $11.2 billion. The stock market estimates that it has between $14.5 billion and $16.3 billion to distribute to them.
The filing indicates that after the claims are paid in full, the plan provides for the payment of additional interest to creditors, to the extent that there are still funds remaining. The interest rate for most creditors is 9%.
That may be less consolation for investors who were trading cryptocurrencies on the stock market when it crashed. When FTX filed for bankruptcy protection in November 2022, bitcoin was priced at $16,080. But cryptocurrency prices have soared as the economy recovered while FTX’s assets were sorted over the past two years. As of Tuesday, a single bitcoin was selling for nearly $62,675. This represents a loss of 290%, slightly less than if we count the accrued interest, if these investors had kept these coins.
Customers and creditors seeking $50,000 or less will get about 118% of their claim, according to the plan filed with the U.S. Bankruptcy Court for the District of Delaware. This covers around 98% of FTX customers.
FTX said it was able to recover funds by monetizing a pool of assets consisting primarily of proprietary investments held by Alameda Companies or FTX Ventures, or legal claims.
FTX was the third largest cryptocurrency exchange in the world when it filed. bankruptcy protection in November 2022 after experiencing the cryptographic equivalent of a banking panic.
CEO and founder Sam Bankman-Fried resigned when the stock market crashed. In March, he was sentenced to 25 years in prison for the massive fraud that occurred at FTX.
Bankman-Fried was sentenced in November of fraud and conspiracy — a dramatic fall after a string of successes that included a Super Bowl ad, testimony before Congress and celebrity endorsements from stars like quarterback Tom Brady, basketball point guard Stephen Curry and comedian Larry David.
The company named its new CEO John Ray III, a longtime bankruptcy lawyer best known for having to clean up the mess left after Enron’s collapse.
“We are pleased to be able to propose a Chapter 11 plan that contemplates repayment of 100 percent of the bankruptcy claim amounts plus interest to non-governmental creditors,” Ray said in a prepared statement.
FTX, technically, remains a company but its future is unclear. In early 2023, Ray said he formed a task force to explore the relaunch of FTX.com, the crypto exchange.
The sordid details of a mismanaged company that emerged after its assets were seized would cripple almost any company attempting a comeback, but there may also be different parameters for cryptocurrency exchanges.
Rival crypto exchange Binance briefly explored the acquisition FTX before its collapse at the end of 2022. Its founder and former CEO Changpeng Zhao, was sentenced last week to four months in prison for looking the other way while criminals used the platform to transfer money linked to child sexual abuse, drug trafficking and terrorism.
Binance remains the largest cryptocurrency exchange in the world.
The bankruptcy court is expected to hold a hearing on the dispersal of FTX assets on June 25.