Users were confused by the news that FTX clients would receive between 10% and 25% of the value of their deposited cryptocurrency assets. Why did this happen?
Sunil Kavori, one of the creditors, recently said that several other changes are also scheduled to be made in the reorganization plan. One point, regarding the amount of compensation paid to victims, raised questions in society.
What is known about the compensation plan
Crypto assets deposited on the platform will be valued at the price upon filing for bankruptcy. Therefore, the actual compensation will be between 10% and 25% of the market value of their cryptocurrency.
FTX shareholders will also receive an additional 18% of the funds seized by the US Department of Justice, but not to exceed $230 million. This became an additional provision on increasing the share of preferred shareholders.
However, many expressed their dissatisfaction with the payment terms, calling it a scam. One user suggested that this payment schedule may be because most of FTX’s shareholders are either Sullivan & Cromwell (representing FTX’s debtors) or clients of Quinn Emanuel, appointed by new FTX management, and acting as dispute counsel. Both law firms work to recover assets from clients of the bankrupt exchange.
The community is speculating about the timing of compensation payments
Work is underway to return funds to account holders affected by the FTX collapse. Amid speculation about the timing of payments, information has appeared on the network that holders of the FTX cryptocurrency could start receiving payments as early as September 30.
However, this was quickly refuted – according to the latest data from the materials of the Chapter 11 bankruptcy case, the court is still considering the compensation plan.
The next hearing to approve the restructuring plan is scheduled for Oct. 7, the court filing shows. If the court approves the plan, payments for claims under $50,000 could begin in late 2024.
While others will receive compensation during the first half of 2025.
FTT interacts with growth
Amid the recent news, FTX has delighted investors. Hoping that the notorious cryptocurrency exchange will start returning funds soon, investors are becoming more optimistic. Such an event could lead to an influx of $16 billion into the market.
At its peak on September 29, the FTX token (FTT) rose 113% in one day. By the end of the day, the price corrected and eventually fell to $2.11 at the time of writing.
Where did the clients’ money go?
FTX, once worth $32 billion, used client money in risky investments through its closely linked hedge fund, Alameda Research. Investigations revealed that the company used client funds to cover losses in other related businesses and finance risky investment deals.
FTX’s massive budget shortfall was discovered after customers asked for their money back. After the bankruptcy of FTX, a restructuring procedure began, and operations began to return funds to clients. However, at the time, the exact reasons why the money disappeared and where it was sent remained the subject of investigation. In total, the stock exchange owes about $9 billion.
Victims wait, and perpetrators serve their sentences
The FTX bankruptcy shook the cryptocurrency market and affected the prices of many currencies. It also raised concerns among users and regulators about the security and liability of cryptocurrency exchanges. In addition to creating a refund plan, the top managers of the exchange are being punished one by one.
Bankman-Fried was charged with fraud, money laundering and other financial crimes related to FTX’s management and customer payments. The charges are based on the fact that he used client funds to support his other businesses, including the Alameda Research business. In March, he was sentenced to 25 years in prison.
Carolyn Ellison, former CEO of Alameda Research, was sentenced to two years in prison and forfeited $11 billion on fraud and money laundering charges. Her active cooperation in the investigation of Bankman-Fried commuted the sentence. The judge stressed that FTX’s collapse is one of the most significant financial crimes, and Ellison’s cooperation does not absolve her of responsibility. She admitted her guilt and apologized to the victims.
Following the ruling by Alameda’s former CEO, other defendants are now awaiting court decisions: FTX co-founder and CTO Gary Wang, as well as engineering chief Nishad Singh.
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