News
FTX will return money to most customers less than 2 years after the catastrophic collapse of cryptocurrencies
FTX says nearly all of its customers will receive money owed back two years after the cryptocurrency exchange’s implosion, and some will receive more.
FTX said in a court filing late 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 statement said that after paying claims in full, the plan provides for the payment of additional interest to creditors, to the extent that funds still remain. The interest rate for most lenders is 9%.
This may be little consolation to investors who were trading cryptocurrency on the stock exchange when it crashed. When FTX sought bankruptcy protection in November 2022, bitcoin was worth $16,080. But cryptocurrency prices have soared as the economy has recovered while FTX’s assets have been sorted out over the past two years. A single bitcoin sold for nearly $62,675 on Tuesday. This equates to a loss of 290%, a little less than if you count the accrued interest, if investors had held on to those coins.
Customers and creditors claiming $50,000 or less will receive about 118% of their debt, under the plan, which was filed in the U.S. Bankruptcy Court for the District of Delaware. This covers approximately 98% of FTX customers.
FTX said it was able to recover funds by monetizing a pool of assets that consisted primarily of proprietary investments held by the Alameda or FTX Ventures businesses or in lawsuits.
FTX was the third largest cryptocurrency exchange in the world when it applied failure protection in November 2022 after suffering the crypto equivalent of a bank run.
CEO and founder Sam Bankman-Fried resigned when the exchange collapsed. In March it was condemned to 25 years in prison for the massive fraud that occurred at FTX.
Bankman-Fried was sentenced in November of fraud and conspiracy — a dramatic fall from a crest of success that included a Super Bowl ad, testimony before Congress and celebrity endorsements from stars like quarterback Tom Brady, basketball point guard Stephen Curry and comedian Larry David.
The company has named new CEO John Ray III, a longtime bankruptcy litigator best known for cleaning up the mess created after Enron’s collapse.
“We are pleased to be able to propose a Chapter 11 plan that provides for 100% repayment of bankruptcy claim amounts plus interest to non-government creditors,” Ray said in a prepared statement.
FTX, technically, remains a company but its future is unclear. In early 2023, Ray said he formed a task force to explore reviving FTX.com, the cryptocurrency exchange.
The story continues
The sordid details of a company run amok that emerged after its assets were seized would hamper almost any company trying to make a comeback, but there may also be different parameters for cryptocurrency exchanges.
Rival cryptocurrency exchange Binance briefly explored the acquisition FTX before its collapse in late 2022. Its founder and former CEO, Changpeng Zhao, was sentenced last week to four months in prison for looking the other way as criminals used the platform to move money linked to child sexual abuse, drug trafficking and terrorism.
Binance is still the largest cryptocurrency exchange in the world.
The bankruptcy court will hold a hearing on the dispersal of FTX’s assets on June 25.