FTX, the collapsed crypto exchange founded by now-jailed Sam Bankman Fried has been cleared to repay its customers using up to $16.5 billion in assets recovered since the exchange collapsed.
The bankruptcy plan by FTX was approved by U.S. Bankruptcy Judge John Dorsey at a court hearing in Wilmington, Delaware where he stated that the peculiar case of FTX has broadened the practice of bankruptcy law and is a model case on how to deal with a very complex bankruptcy proceeding.
The Bankruptcy plan comprises several settlements with FTX customers, creditors, US government agencies, and liquidators.
The settlements according to the Bankruptcy plan allow FTX to repay customers of its exchange first, before entertaining government regulator claims.
FTX plans to repay 98% of its customers first focusing on those who held $50,000 or less on the exchange. The plan is to complete this within 60 days after the plan’s effective date, which has not yet been determined.
U.S. government agencies like the Commodity Futures Trading Commission and Internal Revenue Service all agreed to let FTX pay its customers first as top priority before dealing with fines and tax debts.
Going by their estimate FTX said it will have between $14.7 billion and $16.5 billion available to repay its creditors. This amount is enough to pay customers at least 118% of the value in their accounts as of November 2022, the date that the company filed for bankruptcy.
FTX said the entire development was a victory for creditors and it was all possible due to the ability to recover cash and crypto assets that went missing when the company sadly collapsed in November 2022.
“Today’s achievement is only possible because of the experience and tireless work of the team of professionals supporting this case, who have recovered billions of dollars by rebuilding FTX’s books from the ground up and from there marshaling assets from around the globe,” FTX CEO John Ray said in a statement on Monday.
What to Know
- FTX in its hay days was among the world’s leading cryptocurrency exchanges with huge presence in lucrative markets like US and China.
- FTX collapsed when news leaked that the founder Sam Bankman — Fried was using customer money to pay off risky bets made by his hedge fund Alameda Research. There were also allegations of trading with customer money which was pretty poor at.
- Sam Bankman-Fried was sentenced in March to 25 years in prison for financial misappropriation and stealing from FTX customers. He has appealed his conviction.