An update on the bankrupt cryptocurrency exchange FTX reveals some promising news for its account holders. A plan of reorganization filed recently suggests that almost all account holders could potentially receive more than what they officially claimed.
FTX has managed to gather around $15 billion, primarily from selling off venture capital investments made by the exchange and its affiliate, Alameda Research. This sum seems to be sufficient to pay back 118 cents on the dollar to 98% of creditors who have claims amounting to $50,000 or less. The remaining creditors are also expected to receive at least the full value of their claims.
The collapse of FTX back in November 2022 had left a significant gap in customer accounts, amounting to billions of dollars. This event had profound repercussions on the cryptocurrency industry and led to the founder, Sam Bankman-Fried, being convicted on fraud charges and sentenced to 25 years in federal prison.
John Ray III, who assumed leadership at FTX post-bankruptcy, expressed satisfaction with the proposed Chapter 11 plan, highlighting the aim to return 100% of bankruptcy claim amounts plus interest for non-governmental creditors.
The situation Ray inherited was described publicly as a “dumpster fire” and a “crime scene,” with allegations of Bankman-Fried misappropriating customer funds for personal use and trading, a scheme that unraveled as cryptocurrency values plummeted during the 2022 “crypto winter.”
Despite the recent surge in crypto prices, the expected recoveries for account holders haven’t materialized as anticipated. FTX reports that approximately 99% of the cryptocurrencies believed to be in the exchange’s possession at the time of bankruptcy filing are missing. This shortfall has been somewhat offset by proceeds from the company’s investment portfolio.
One of FTX’s valuable assets included a stake in the AI startup Anthropic, which it sold for nearly $900 million this year. The plan of reorganization has garnered support from all major creditor groups and includes a $200 million cash settlement for a $24 billion claim filed by the US Internal Revenue Service (IRS).
Once the bankruptcy court approves the proposed plan, claimants will have the opportunity to vote on its terms before a final hearing confirms it officially. The anticipated recoveries are based on cryptocurrency prices at the time of the bankruptcy filing, during which Bitcoin had experienced a more than 50% decline in the six months leading up to November 2022.
