The plan could distribute up to $16 billion in cash to FTX investors and clients
Bankruptcy lawyers representing clients affected by the dramatic collapse of the cryptocurrency exchange FTX 17 months ago say the vast majority of victims will get their money back, plus interest.
The news comes six months after FTX co-founder and former CEO Sam Bankman-Fried (SBF) was convicted on seven charges related to fraud, conspiracy, and money laundering, with about $8 billion in missing customer funds. SBF was sentenced to 25 years in prison in March and ordered to pay $11 billion in forfeiture. The cryptocurrency mogul filed an appeal last month that could take years.
Restructuring
After filing for bankruptcy in late 2022, SBF resigned and U.S. attorney John J. Ray III was appointed CEO and “restructuring director,” tasked with overseeing the reorganization of FTX. Shortly after taking office, Ray testified that despite some audits that had been conducted previously at FTX, he did not “trust a single sheet of paper in this organization.” In the months that followed, Ray and his team worked to trace the missing funds, with about $8 billion placed in real estate, political donations, and venture capital investments, including a $500 million investment in the artificial intelligence company Anthropic before the generative AI boom, which FTX’s ownership managed to sell earlier this year for $884 million.
Initially, it seemed unlikely that investors would recover much or any of their money, but signals in recent months suggested there might be good news on the horizon, with advances in cash recovery through various investments FTX had made, as well as from executives involved with the company.
We now know that 98% of FTX creditors will receive 118% of the value of their FTX-held assets in cash, while the remaining creditors will receive 100%, plus “billions in compensation for the temporary value of their investments,” according to a press release issued today by FTX’s estate.
In total, FTX says it will be able to distribute between $14.5 and $16.3 billion in cash, which includes assets currently under the control of entities including Chapter 11 debtors, liquidators, the Bahamas Securities Commission, the U.S. Department of Justice, among several other parties.
While the reorganization plan will need approval from the respective bankruptcy court, the intention, they say, is to resolve all ongoing disputes with stakeholders and the government, “without costly and protracted litigation.”
It is worth noting here that creditors will not benefit from the Bitcoin boom that has emerged from the cryptocurrency industry since FTX went bankrupt. At the time of filing for bankruptcy, FTX had a huge deficit in Bitcoin and Ethereum, much less than what customers believed it actually held.
As such, the appreciation in the value of these tokens will not be realized as part of this agreement.
By: Nestor Castillo, ForAllTechNews Director