FTX's $16.5 billion bankruptcy plan approved to repay defrauded customers
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FTX's $16.5 billion bankruptcy plan approved to repay defrauded customers
The plan prioritizes repaying claims from FTX customers, with competing claims from government regulators ranked lower.
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Translation: Blockchain Knight
According to a Reuters report on October 7, the bankruptcy plan of the now-defunct crypto exchange FTX has been approved by the court, allowing it to use its recovered assets of $16.5 billion to repay customers.
U.S. Bankruptcy Judge John Dorsey approved the plan during a hearing in Wilmington, Delaware, which includes creditors from over 200 jurisdictions.
The plan relies on settlements reached with FTX customers, creditors, U.S. government agencies, and international liquidators.
The plan prioritizes repayment of claims from FTX customers, followed by competing claims from government regulators.
Authorities estimate that the collapse of FTX left approximately 9 million customers and investors facing significant financial losses.
According to a statement released by FTX, as of November 2022, 98% of FTX's customers have received compensation amounting to nearly 119% of their total account balances.
The repayment process will begin within 60 days after the plan becomes effective. However, the exact date for the first distribution of currently held assets will be announced separately by the debtor-in-bankruptcy protection.
Alex Thorn, head of research at Galaxy, said approximately $1.1 billion will be distributed this year to creditors with claims below $50,000. The remainder will be paid out between the first and second quarters of 2025.
FTX noted that this outcome was made possible by recovering assets lost during the company’s collapse.
John J. Ray III, CEO of FTX, stated in a press release that the approval of the plan marks an important milestone.
He added, "The professional team supporting this case has been experienced and tireless—rebuilding FTX’s accounting from scratch and then marshaling assets around the world, recovering billions of dollars."
Although the total recovered value could reach up to $16.5 billion, after cash conversion, the amount may drop to $14.7 billion.
Additional funds were also raised through asset sales, including equity stakes in technology companies such as AI startup Anthropic.
Ray III emphasized that all bankruptcy claims, except those from government creditors, will be repaid with interest.
Notably, repayments will be made in cash. FTX explained that returning the original crypto assets is not feasible because these assets were misappropriated by exchange founder Sam Bankman-Fried.
Previously, Sam Bankman-Fried was sentenced to 25 years in prison for defrauding FTX customers. However, he filed an appeal on September 13, claiming the trial was marred by misconduct.
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