In a significant development for users of the collapsed cryptocurrency exchange FTX, creditors are set to receive up to $16.5 billion under a newly approved bankruptcy plan in the U.S. This move marks the beginning of a resolution for many customers who lost access to their funds when FTX declared bankruptcy in November 2022.
The FTX Collapse: A Brief Recap
The downfall of FTX was dramatic, with former CEO Sam Bankman-Fried found guilty of misusing customer funds. He was sentenced to 25 years in prison for his role in the scandal, which left millions without their crypto assets. At the time of its collapse, approximately $8 billion in customer funds were reported missing, along with various debts to investors.
What Does the New Plan Mean for Customers?
The approved bankruptcy plan allows former customers to reclaim around 119% of the amount they had in their accounts at the time of the bankruptcy. This means many users will receive a little more than they lost, a silver lining in a troubling situation.
Creditors are expected to receive their refunds 60 days after the plan takes effect, although the exact date is yet to be determined. John J Ray III, the attorney overseeing the bankruptcy process, described this approval as a “significant milestone.” He emphasized that they are prepared to return 100% of bankruptcy claim amounts plus interest for non-governmental creditors.
Recovering Lost Funds
Since the bankruptcy filing, Ray’s team has successfully recovered assets valued between $14.7 billion and $16.5 billion. This recovery was partially achieved by selling off FTX’s remaining assets, including its investment in the AI firm Anthropic.
The bankruptcy court’s decision prioritizes repaying customers before other unsecured creditors, like the government.
Mixed Reactions from Customers
The announcement has received mixed reactions from former FTX users. Some customers are pleased about the prospect of recovering their funds but are frustrated that the repayment will be in cash. Many believe that the value of their lost crypto holdings, particularly Bitcoin, which has more than tripled since November 2022, would have been worth much more today.
Conclusion: A Step Toward Resolution
While this bankruptcy plan offers a glimmer of hope for former FTX customers, the emotional toll of the collapse and the lost potential value of their investments remain a sore point. The coming months will reveal how this situation unfolds and whether customers will feel satisfied with the resolution.
I am Aparna Sahu
Investment Specialist and Financial Writer
With 2 years of experience in the financial sector, Aparna brings a wealth of knowledge and insight to Investor Welcome. As an accomplished author and investment specialist, Aparna has a passion for demystifying complex financial concepts and empowering investors with actionable strategies. She has been featured in relevant publications, if any, and is dedicated to providing clear, evidence-based analysis that helps clients make informed investment decisions. Aparna holds a relevant degree or certification and is committed to staying ahead of market trends to deliver the most up-to-date advice.