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Most FTX account holders will recover their money after bankruptcy
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Nearly all account holders at bankrupt cryptocurrency exchange FTX are in line to receive cash worth more than 100% of their official claims, according to a reorganization plan filed in court Tuesday night.
FTX said it had raised about $15 billion, mostly from the sale of venture capital investments made by the exchange and its trading affiliate Alameda Research. The sum is enough to pay 118 cents on the dollar to 98% of creditors with claims of $50,000 or less.
The remaining creditors will receive at least 100 cents on the dollar.
FTX collapsed in November 2022, leaving billions of dollars’ worth of holes in customer accounts. The failure shook the cryptocurrency sector and led to the conviction of founder Sam Bankman-Fried on fraud charges. Bankman-Fried was sentenced to 25 years in federal prison.
John Ray III, who took the helm of FTX after it filed for bankruptcy, said Tuesday: “We are pleased to be able to propose a Chapter 11 plan that provides for the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors”.
Ray publicly described the FTX venture he took over as a “dumpster fire” and a “crime scene” amid allegations that Bankman-Fried had raided client accounts for lavish personal spending and trading, a scheme that is collapsed as digital asset prices lost steam during 2022.”crypto winter”.
FTX noted that the recent sharp rally in cryptocurrency prices has not driven the large recoveries expected for account holders. Rather, it said that about 99% of bitcoin and other cryptocurrencies believed to be on the exchange at the time of the bankruptcy filing had disappeared, leaving the recovery pool largely filled by proceeds from the company’s investment portfolio.
Among FTX’s most interesting assets was a stake in the artificial intelligence start-up Anthropic, whose shares have sold for nearly $900 million this year. FTX said assets converted to cash will amount to between $14.5 billion and $15.8 billion.
The reorganization plan had received the support of all major creditor groups of FTX and included a $200 million cash settlement of a $24 billion claim made against the group by the Internal Revenue Service, the of US tax collection.
After the bankruptcy court approves the proposed new plan, plaintiffs will have to vote on the terms before the court holds a final hearing to officially confirm it.
Recoveries are based on cryptocurrency prices at the time of the bankruptcy filing. Bitcoin, the most traded token, had fallen by more than 50% in the six months leading up to November 2022.