FTX Cleared To Repay Billions After Bankruptcy Plan Approval
The approved plan prioritizes customer repayments over competing claims from U.S. government agencies like the IRS and CFTC, with FTX recovering between $14.7 billion and $16.5 billion.
FTX has been granted court approval to return billions to its customers, advancing its bankruptcy process. The wind-down plan, sanctioned by U.S. Bankruptcy Judge John Dorsey, allows FTX to allocate as much as $16.5 billion in reclaimed assets for customer reimbursement. According to the plan, 98% of customers, specifically those with claims up to $50,000, are anticipated to receive repayment within 60 days from the plan's commencement date, which remains to be set.
The collapse of FTX in 2022 stemmed from the discovery that its founder, Sam Bankman-Fried, diverted customer funds to support risky trades by his hedge fund, Alameda Research. Bankman-Fried received a 25-year prison sentence for fraud. Despite his appeal against the conviction, FTX is still in the process of asset recovery for its creditors.
FTX, under the leadership of CEO John Ray, has amassed between $14.7 billion and $16.5 billion in assets to distribute to creditors. This figure exceeds the estimated $11.2 billion owed to creditors, largely due to the sale of assets, including venture investments like its stake in AI startup Anthropic.
Customers who deposited crypto like bitcoin are frustrated that repayments are based on 2022 valuations, with bitcoin rising from $16,000 to over $63,000 since then. FTX stated that it’s impossible to return customers' original crypto assets, as they were misappropriated by Bankman-Fried, and that purchasing crypto on the open market to repay customers would be prohibitively expensive. Despite objections, the plan is hailed as a victory, with FTX CEO John Ray crediting the recovery to the diligent efforts of the professionals involved in the case.
