FTX, once a giant in the crypto exchange world, has overcome a major hurdle in its bankruptcy proceedings. An American bankruptcy on Monday The court approved the plan to refund customers using up to $16.5 billion in recovered assets. The approval marks a victory for the company’s efforts to right the wrongs that led to the collapse.
U.S. Bankruptcy Judge John Dorsey, who presided over the case, called FTX’s resolution “a model case” for handling such complex Chapter 11 filings. The approval offers hope FTX customers, many of whom have been waiting since 2022 to get their money back.
FTX APPROVES TO PAY CUSTOMERS AGAINST $1 BILLION FOR SEIZED ASSETS
– A US bankruptcy judge approved a plan for FTX to refund customers more than $12.6 billion after their digital assets were locked on the platform following its collapse in November 2022.
– FTX is in discussions with… pic.twitter.com/TWjNV1BhAP
— BSCN (@BSCNews) October 7, 2024
The payback schedule: a complicated package for customers
FTX would pay approx 98% of account holders with less than $50,000 on the platform through this settlement. The plan starts paying out after 60 days of activation. Although it sounds nice for those customers, not all of them are satisfied. Since the values are based on November 2022 cryptocurrency prices, which also happened to be the month FTX collapsed, they feel like they’re getting the raw end of the deal.
As of today, the market cap of cryptocurrencies stood at $2.12 trillion. Chart: TradingView.com
Bitcoin was only valued at around $16,000 at the time. Today, Bitcoin’s value has skyrocketed to over $63,000. Some consumers, backed by attorney David Adler, argue that given the current value of cryptocurrencies, FTX’s claim of a 100% return does not accurately reflect their losses. Yet FTX claims that since founder Sam Bankman-Fried mismanaged these assets, it is not feasible to simply refund cryptocurrency deposits.
The role Bankman-Fried played and what FTX acquired
The disastrous collapse of FTX is largely due to the efforts of the FTX Sam Bankman-Fried. The founder was sentenced earlier this year to 25 years in prison for using customer money to finance risky bets by his hedge fund, Alameda Research. When FTX went bankrupt, it held barely 0.1% of the bitcoin its users thought they had.
FTX’s new management has been searching for the missing assets ever since. They have managed to recover billions of dollars in cryptocurrency and cash. Proceeds from the sale of shares in companies such as AI company Anthropic were among the sources of this money. Because of this effort, FTX calculated it could repay creditors between $14.7 billion and $16.5 billion.
A victory for some, but there is still dissatisfaction
Although the turnaround is positive, there are still problems. FTX and the U.S. Department of Justice have yet to agree on most of the additional $1 billion seized in the Bankman-Fried crime investigation. The seized money could ultimately generate as much as $230 million for shareholders, who would otherwise not benefit from a bankruptcy.
Even though there have been improvements, some customers feel like they are missing the current cryptocurrency boom. Since the market fell in 2022, the value of cryptocurrencies has soared. Many people lost more than just money when the FTX fell; they also missed their chance to make money when the market picked up again.
Featured image from The Economic Times, chart from TradingView