FTX announces that the majority of its clients will be reimbursed for their outstanding funds, two years after the collapse of the cryptocurrency exchange, with some customers receiving more than the amount owed.
According to a revised Plan of Reorganization submitted to a U.S. bankruptcy court on Tuesday, FTX anticipates having between $14.5 billion and $16.3 billion available to distribute to customers and other creditors globally.
The document states that after settling all claims, the plan includes additional interest payments to creditors, depending on the availability of funds. The interest rate for most creditors is set at 9%.
While this news may offer some relief to investors who lost funds trading cryptocurrency on the platform during its collapse, the situation remains challenging. At the time of FTX's bankruptcy filing in November 2022, the price of bitcoin stood at $16,080. However, with the significant surge in crypto prices during the economic recovery and the resolution of FTX's assets over the past two years, the value of a single bitcoin has risen to nearly $62,675 as of Tuesday. This translates to a loss of approximately 290% for those investors, a figure slightly lower when factoring in accrued interest, had they retained their bitcoin holdings.
Customers and creditors that claim $50,000 or less will get about 118% of their claim, according to the plan, which was filed with the U.S. Bankruptcy Court for the District of Delaware. This covers about 98% of FTX customers.
FTX said that it was able to recover funds by monetizing a collection of assets that mostly consisted of proprietary investments held by the Alameda or FTX Ventures businesses, or litigation claims.
FTX was the third-largest cryptocurrency exchange in the world when it filed for bankruptcy protection in November 2022 after it experienced the crypto equivalent of a bank run.
CEO and founder Sam Bankman-Fried resigned when the exchange collapsed. In March he was sentenced to 25 years in prison for the massive fraud that occurred at FTX.
Bankman-Fried was convicted in November of fraud and conspiracy — a dramatic fall from a crest of success that included a Super Bowl advertisement, testimony before Congress and celebrity endorsements from stars like quarterback Tom Brady, basketball point guard Stephen Curry and comedian Larry David.
The company appointed as its new CEO John Ray III, a long-time bankruptcy litigator who is best known for having to clean up the mess made after the collapse of Enron.
"We are pleased to be in a position to propose a chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors," Ray said in a prepared statement.
FTX, once a thriving company, now finds itself at a crossroads. In early 2023, Ray announced the formation of a task force with the goal of resurrecting FTX.com, the crypto exchange.
Despite the tumultuous past that came to light after its assets were confiscated, which would typically spell doom for most businesses looking to make a comeback, the landscape for cryptocurrency exchanges may offer a different set of opportunities.
Prior to its collapse in late 2022, the rival crypto exchange Binance had briefly entertained the idea of acquiring FTX. However, its founder and former CEO, Changpeng Zhao, was recently handed a four-month prison sentence for turning a blind eye to illicit activities on the platform, including facilitating transactions related to child exploitation, drug trafficking, and terrorism.
Despite these challenges, Binance remains the largest crypto exchange globally.
The fate of FTX's assets will be determined in a hearing at the bankruptcy court scheduled for June 25.
