Bitcoin
FTX Clients Will Get Funds Back After Catastrophic Crypto Meltdown
FTX claims that almost all of its customers will receive back the money they owe two years after the cryptocurrency exchange’s implosion, and some will receive more than that.
FTX said in a court filing on Tuesday that it owes about $11.2 billion to its creditors. The exchange estimates it has between $14.5 billion and $16.3 billion to distribute to them.
The document states that, after claims have been paid in full, the plan provides for the payment of additional interest to creditors, to the extent that funds remain. The interest rate for most lenders is 9%.
That may be little consolation to investors who traded cryptocurrencies on the exchange when it collapsed. When FTX sought bankruptcy protection in November 2022, bitcoin was priced at $16,080. But cryptocurrency prices have soared as the economy has recovered while FTX assets have been settled over the past two years. A single bitcoin on Tuesday was selling for about $62,675. This results in a loss of 290%, slightly less than if the accrued interest is counted, if these investors had held these coins.
Customers and creditors claiming $50,000 or less will receive about 118% of their claim, according to the plan, which has been filed with the U.S. Bankruptcy Court for the District of Delaware. This covers around 98% of FTX customers.
FTX said it was able to recover funds by monetizing a collection of assets that consisted primarily of proprietary investments held by the companies Alameda or FTX Ventures, or lawsuits.
FTX was the third largest cryptocurrency exchange in the world when it filed bankruptcy protection in November 2022, after experiencing the crypto equivalent of a bank run.
CEO and founder Sam Bankman-Fried resigned when the stock market collapsed. In March he was condemned to 25 years in prison for the massive fraud that occurred at FTX.
The banker-Fried was sentenced in November of fraud and conspiracy – a dramatic fall from a peak of success that included a Super Bowl ad, testimony before Congress and endorsements from celebrities such as quarterback Tom Brady, basketball guard Stephen Curry and comedian Larry David.
The company named as its new CEO John Ray III, a longtime bankruptcy litigator who is best known for having to clean up the mess made after Enron’s collapse.
“We are pleased to be able to propose a Chapter 11 plan that contemplates the return of 100% of bankruptcy filing amounts plus interest to non-governmental creditors,” Ray said in a prepared statement.
FTX technically remains a company, but its future is unclear. In early 2023, Ray said he had formed a task force to explore revitalizing FTX.com, the cryptocurrency exchange.
The sordid details of a runaway company that emerged after its assets were seized would harm almost any company trying to recover, but there may also be different parameters for cryptocurrency exchanges.
Rival cryptocurrency exchange Binance we briefly explore the acquisition FTX before collapsing in late 2022. Its founder and former CEO, Changpeng Zhao, was sentenced last week to four months in prison for looking away while criminals used the platform to move money related to child sexual abuse, drug trafficking and terrorism.
Binance is still the largest cryptocurrency exchange in the world.
The bankruptcy court is expected to hold a hearing on the dispersal of FTX’s assets on June 25.