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FTX Reorganization: Most Customers to Get Full Refund

FTX's reorganization plan, published late Tuesday, estimates that the exchange owes creditors around $11.2 billion
May 8, 2024

FTX, the cryptocurrency exchange that made headlines after its collapse, is making amends. According to a recent court filing, almost all customers affected by the collapse will not only get their money back but also receive more than they initially invested.

The reorganization plan, revealed late Tuesday, estimates that FTX owes creditors approximately $11.2 billion. However, the good news is that the exchange has between $14.5 billion and $16.3 billion to distribute to its creditors.

Here’s the breakdown: customers with claims of $50,000 or less will receive approximately 118% of their allowed claim. This compensation will be received by around 98% of FTX's creditors.

This reorganization plan, although pending approval from the Bankruptcy Court, is expected to bring some relief to FTX customers. Since the exchange filed for bankruptcy in November 2022, customers have been grappling with locked-up funds. 

The collapse of FTX was not without its high-profile fallout. Its founder, Sam Bankman-Fried, was convicted on seven criminal counts, including charges related to embezzling billions of dollars from FTX’s customers. Bankman-Fried received a 25-year prison sentence.

However, FTX managed to secure funds through various means. It sold off assets, including venture investments and other holdings, to raise the necessary capital. One notable divestment was its stake in Anthropic, an artificial intelligence firm backed by Amazon, which earned FTX nearly $900 million.

The reorganization efforts were necessitated by the substantial amount of cryptocurrency missing from the exchange.

“Accordingly, the Debtors have not been able to benefit from the appreciation of these missing tokens during the chapter 11 cases. Instead, the Debtors have had to look to other sources of recoverable value to repay creditors,” FTX stated in a press release on Wednesday.

It’s worth noting the significant appreciation in crypto prices since November 2022, with Bitcoin up around 270% since FTX’s bankruptcy filing.

Following Bankman-Fried's departure, John Ray III was appointed as CEO. Commenting on FTX in November 2022, Ray expressed shock, stating, “In his 40 years of legal and restructuring experience, he had never seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”

“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 statement on Wednesday.

In summary, FTX's reorganization plan promises to not only reimburse the creditors fully but also provide interest to non-governmental creditors. With nearly all customers set to receive more than their initial investment, it marks a significant step in the recovery process for the cryptocurrency exchange and its stakeholders.

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