Written by Dietrich Knuth
NEW YORK (Reuters) – FTX received court approval for its bankruptcy plan on Monday, which will allow it to repay customers in full using up to $16.5 billion in assets recovered since the collapse of the once-leading cryptocurrency exchange.
U.S. Bankruptcy Judge John Dorsey approved the liquidation plan at a court hearing in Wilmington, Delaware, saying FTX’s success made it “a model case for how to handle very complex Chapter 11 bankruptcy proceedings.”
The plan is built on a series of settlements with FTX’s clients, creditors, US government agencies and appointed liquidators to wind up FTX’s operations outside the United States.
The settlements allow FTX to use its assets to repay customers of its cryptocurrency exchange first, before paying out potentially competing claims brought by government regulators. FTX plans to repay 98% of its clients — those with $50,000 or less in the exchange — within 60 days after the plan’s effective date, which has not yet been determined.
FTX, once among the world’s top cryptocurrency exchanges, collapsed after news emerged that its founder Sam Bankman-Fried took client money to pay off risky bets made by his hedge fund, Alameda Research. Bankman-Fried was sentenced in March to 25 years in prison for stealing from FTX customers, and he has appealed his conviction.
FTX is still in talks with the US Department of Justice over $1 billion seized by the government during the criminal trial of Bankman-Fried. FTX shareholders, who would normally get nothing in bankruptcy proceedings, could receive up to $230 million in funds seized by the Justice Department, according to court documents.
FTX estimated it would have between $14.7 billion and $16.5 billion available to repay creditors, enough to pay customers at least 118% of the value in their accounts as of November 2022, the date the company filed for bankruptcy.
US government agencies, including the Commodity Futures Trading Commission and the Internal Revenue Service, have agreed to allow FTX to prioritize customer repayments over fines and tax debts, and a liquidator appointed in the Bahamas has agreed to work with FTX after previously challenging the company’s authority to file for bankruptcy in the US. United
FTX said the result was a victory for creditors, made possible by its ability to recover cash and crypto assets lost during the company’s chaotic collapse. The company has also raised additional funds by selling other assets, including its investments in technology companies such as artificial intelligence startup Anthropic.
“Today’s accomplishment is only possible because of the experience and hard work of the team of professionals supporting this cause, who have recovered billions of dollars by rebuilding FTX’s books from the ground up and from there mobilizing assets from around the world,” FTX CEO John Ray said in a statement. Monday.
Clients had mixed reactions to the plan, with many expressing disappointment that FTX’s demise caused them to miss a strong rebound in cryptocurrency prices since the market bottomed in 2022. Some clients objected to the plan, demanding higher payouts than The latter reflects the rise in cryptocurrency values.
The price of bitcoin, for example, has risen to more than $63,000 from its November 2022 price of $16,000, said David Adler, a lawyer representing four dissenting creditors. Adler said customers who deposited bitcoin on the FTX exchange have a hard time accepting FTX’s claim that they are receiving a 100% refund based on those low prices two years ago.
FTX said it was not possible to simply return the cryptocurrency assets deposited by customers, because the customers’ assets had disappeared, and Bankman-Fried had embezzled them.
At the time of its bankruptcy filing, FTX.com owned just 0.1% of the bitcoin its customers believed they had deposited on the exchange, according to the company. One of FTX’s financial advisors, Steve Kovric, testified Monday that it would be “extremely expensive” to purchase billions in crypto assets on the open market in order to repay clients with the same types of cryptocurrencies they had before the bankruptcy.