FTX, once a giant in the crypto exchange world, has cleared a major hurdle in its bankruptcy proceedings. On Monday, a US bankruptcy court approved its plan to repay customers using up to $16.5 billion in recovered assets. The approval signals a win for the company’s efforts to right the wrongs that caused its collapse.
US Bankruptcy Judge John Dorsey, presiding over the case, called FTX’s resolution “a model case” for handling such complex Chapter 11 filings. The approval offers hope for FTX customers, many of whom have been waiting since 2022 to recover their funds.
FTX APPROVED TO REPAY CUSTOMERS AMID BATTLE FOR $1 BILLION SEIZED ASSETS
– A U.S. bankruptcy judge approved a plan for FTX to repay customers over $12.6 billion after their digital assets were locked on the platform following its collapse in November 2022.
– FTX is in talks to… pic.twitter.com/TWjNV1BhAP
— BSCN (@BSCNews) October 7, 2024
The Payback Schedule: A Complicated Package For Clients
FTX would pay approximately 98% of account holders with less than $50,000 on the platform through this settlement. The plan will start the payout after 60 days of activation. Although it sounds sweet for those customers, not all of them are satisfied. Because the values are based on the cryptocurrency prices from November 2022 and also happened to be the month that FTX collapsed, they feel they’re getting the raw end of the deal.
Bitcoin was only valued about $16,000 at the time. In the present day, the value of bitcoin has skyrocketed above $63,000. Some consumers, backed by lawyer David Adler, contend that, given the current value of cryptocurrencies, FTX’s claim of a 100% return doesn’t accurately represent their losses. Yet, FTX claims that since founder Sam Bankman-Fried mismanaged those assets, it is not feasible to just reimburse cryptocurrency deposits.
The Part Bankman-Fried Played And What FTX Acquired
FTX’s disastrous collapse is largely due to the efforts of Sam Bankman-Fried. The founder was earlier this year sentenced to 25 years in prison for using client funds to finance high-risk wagers made by his hedge fund, Alameda Research. When FTX declared bankruptcy, it possessed barely 0.1% of the bitcoin that its users believed they had.
The new management of FTX has been searching for the missing assets ever since. They have succeeded in reclaiming billions of dollars in cryptocurrency as well as cash. The proceeds from the sale of stakes in businesses such as the AI company Anthropic were among the sources of these cash. Because of this endeavor, FTX calculated that it could pay back creditors between $14.7 billion and $16.5 billion.
A Win For Some, But There’s Still DissatisfactionAlthough the reversal is positive, issues are still at hand. For the extra $1 billion seized in the inquiry into Bankman-Fried’s crime, FTX, and the US Department of Justice have yet to agree on most matters. The seized money could eventually ensure as much as $230 million for the shareholders, who would otherwise benefit nothing from a bankruptcy.
Even though there have been improvements, some clients feel like they are missing out on the current rise in cryptocurrency. Since the market fell in 2022, the value of cryptocurrencies has gone up by a huge amount. A lot of people lost more than just money when FTX went down; they also missed their chance to make money when the market went back up.
Featured image from The Economic Times, chart from TradingView