FTX, a cryptocurrency exchange that experienced a major crash 17 months ago, is now offering hope to its customers. Bankruptcy lawyers representing the affected customers have announced that the majority of victims will not only receive their money back but also be compensated with interest. This news comes six months after FTX’s co-founder and former CEO, Sam Bankman-Fried (SBF), was found guilty of fraud, conspiracy, and money laundering, resulting in the disappearance of $8 billion of customers’ funds. SBF was subsequently sentenced to 25 years in prison and ordered to pay $11 billion in forfeiture. However, he has filed an appeal that could potentially delay the resolution for years.
In late 2022, FTX filed for bankruptcy, and SBF stepped down from his position. The company appointed U.S. attorney John J. Ray III as the CEO and chief restructuring officer to oversee FTX’s reorganization. Ray expressed his lack of trust in the organization, stating that he didn’t rely on any previous audits conducted at FTX. Under Ray’s leadership, the team diligently worked to track down the missing funds. They discovered that around $8 billion had been invested in real estate, political donations, and venture capital, including a $500 million investment in AI company Anthropic that was sold for $884 million earlier this year.
Initially, it seemed unlikely that investors would recover much of their lost funds. However, recent developments indicated a glimmer of hope. FTX made progress in reclaiming cash through various investments and cooperation from executives involved with the company. Now, it has been revealed that 98% of FTX creditors will receive 118% of the value of their assets in cash, while the remaining creditors will receive 100%. Additionally, these creditors will be compensated with billions for the time value of their investments.
FTX has estimated that it will be able to distribute between $14.5 and $16.3 billion in cash, including assets controlled by entities such as chapter 11 debtors, liquidators, the Securities Commission of The Bahamas, and the United States Department of Justice. However, this reorganization plan still requires approval from the relevant bankruptcy court. The company aims to resolve all ongoing disputes with stakeholders and government entities without engaging in costly and time-consuming litigation.
It is important to note that creditors will not benefit from the recent surge in Bitcoin and Ethereum prices. At the time of FTX’s bankruptcy filing, the company held a significantly smaller amount of these cryptocurrencies than customers believed. Therefore, the appreciation in the value of these tokens will not be factored into the settlement.
This announcement brings a sense of relief to FTX’s customers who had feared losing their investments. The efforts made by the bankruptcy lawyers and the new management team have resulted in a positive outcome for the majority of creditors. It is a testament to the importance of thorough audits and transparent financial practices in the cryptocurrency industry. As the sector continues to evolve, it is crucial for investors to exercise caution and ensure the security of their assets.
