FTX Files Plan to Fully Reimburse Customers Defrauded of Billions
After two years of turmoil, FTX, the cryptocurrency exchange, has filed a plan to fully reimburse its customers who were defrauded of billions of dollars. The plan, filed in a U.S. bankruptcy court, estimates that it has between $14.5 billion and $16.3 billion to distribute to customers and other creditors around the world.
“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, the new CEO of FTX.
The plan provides for supplemental interest payments to creditors, to the extent that funds still remain. The interest rate for most creditors is 9%. This may be a small consolation for investors who were trading cryptocurrency on the exchange when it collapsed. When FTX sought bankruptcy protection in November 2022, bitcoin was going for $16,080. But crypto prices have soared as the economy recovered while the assets at FTX were sorted out over the past two years. A single bitcoin on Tuesday was selling for close to $62,675.
Bitcoin price surge
Customers and creditors that claim $50,000 or less will get about 118% of their claim, according to the plan. This covers about 98% of FTX customers. FTX was able to recover funds by monetizing a collection of assets that mostly consisted of proprietary investments held by the Alameda or FTX Ventures businesses, or litigation claims.
The Rise and Fall of FTX
FTX was the third-largest cryptocurrency exchange in the world when it filed for bankruptcy protection in November 2022 after it experienced the crypto equivalent of a bank run. CEO and founder Sam Bankman-Fried resigned when the exchange collapsed. In March, he was sentenced to 25 years in prison for the massive fraud that occurred at FTX.
Sam Bankman-Fried
Bankman-Fried was convicted in November of fraud and conspiracy, a dramatic fall from a crest of success that included a Super Bowl advertisement, testimony before Congress, and celebrity endorsements from stars like quarterback Tom Brady, basketball point guard Stephen Curry, and comedian Larry David.
The Future of FTX
FTX, technically, remains a company, but its future is unclear. In early 2023, Ray said that he had formed a task force to explore reviving FTX.com, the crypto exchange. The sordid details of a company run amuck that emerged after its assets were seized would hamstring almost any business attempting a comeback, but there may also be different parameters for cryptocurrency exchanges.
Cryptocurrency exchange
The rival crypto exchange Binance briefly explored acquiring FTX before it collapsed in late 2022. Its founder and former CEO Changpeng Zhao was sentenced last week 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.
