FTX Customers to Receive Full Refund, Plus Interest
In a surprising turn of events, cryptocurrency exchange FTX has announced that nearly all of its customers will receive a full refund of their owed money, two years after the exchange’s collapse. In addition to the refund, some customers will even receive more than what they were owed.
According to a court filing, FTX owes approximately $11.2 billion to its creditors. However, the exchange estimates that it has between $14.5 billion and $16.3 billion to distribute to them. After paying claims in full, the plan provides for supplemental interest payments to creditors, to the extent that funds still remain. The interest rate for most creditors is 9%.
“We are pleased to be in a position to propose a chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors,” said John Ray III, FTX’s new CEO.
The road to recovery has been long and arduous for FTX customers. When the exchange collapsed in November 2022, bitcoin was trading at around $16,080. However, crypto prices have soared since then, with a single bitcoin selling for close to $62,675 on Tuesday. This means that customers who held onto their coins would have suffered a 290% loss, or slightly less if accrued interest is counted.
Customers and creditors who claim $50,000 or less will receive approximately 118% of their claim, covering about 98% of FTX customers. FTX was able to recover funds by monetizing a collection of assets, including proprietary investments held by Alameda or FTX Ventures businesses, or litigation claims.
The Rise and Fall of FTX
FTX was once the third-largest cryptocurrency exchange in the world, but it filed for bankruptcy protection in November 2022 after experiencing a crypto equivalent of a bank run. CEO and founder Sam Bankman-Fried resigned when the exchange collapsed and was later sentenced to 25 years in prison for massive fraud.
Bankman-Fried’s fall from grace was dramatic, from testifying before Congress to featuring in a Super Bowl advertisement, and even earning celebrity endorsements from stars like Tom Brady, Stephen Curry, and Larry David.
FTX’s new CEO, John Ray III, is tasked with reviving the exchange.
The Future of FTX
FTX, technically, remains a company, but its future is unclear. In early 2023, Ray formed a task force to explore reviving FTX.com, the crypto exchange. However, the sordid details of the company’s past may make a comeback challenging.
The rival crypto exchange Binance briefly explored acquiring FTX before it collapsed in late 2022. Its founder and former CEO Changpeng Zhao was sentenced to four months in prison for looking the other way as criminals used the platform to move money connected to child sex abuse, drug trafficking, and terrorism.
The bankruptcy court is set to hold a hearing on the dispersion of FTX assets on June 25.
The cryptocurrency market has seen significant growth since FTX’s collapse.
