Most Account Holders of FTX to Receive Funds Post-Bankruptcy

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Most clients of the collapsed FTX cryptocurrency exchange are anticipated to get payouts exceeding the full value of their claims, based on a reorganization plan submitted to the court on Tuesday evening.

FTX reported that it had secured an approximate $15bn, largely from liquidating venture capital investments from both the firm and its affiliate Alameda Research. This amount would cover 118% of the value for 98% of creditors who have claims not exceeding $50,000.

All other creditors are also expected to recover their full claim value.

The FTX crisis emerged in November 2022, creating a multibillion-dollar deficit in client funds. The event sent shockwaves across the crypto market and concluded with the conviction of the exchange’s founder, Sam Bankman-Fried, on fraud charges. He was sentenced to a 25-year prison term.

John Ray III, appointed to lead FTX through bankruptcy, expressed optimism about the proposed Chapter 11 plan, which would not only recompense the non-governmental creditors’ full bankruptcy claim but also include accrued interest.

Ray has referred to the takeover of FTX as confronting a “disaster” and a “scene of a crime,” amid accusations that customer funds were misappropriated by Bankman-Fried for private extravagance and speculative activities. The scandal erupted as the value of digital assets dwindled during 2022’s “crypto winter”.

Despite a rebound in crypto values, FTX states that this has not resulted in substantial asset recovery for clients. It noted that around 99 percent of the bitcoin and other digital currencies presumed to be in FTX’s possession at the bankruptcy’s initiation were unaccounted for. As a result, the financial reparation primarily hinges on the sales made from the company’s investment assets.

A prime asset of FTX, a stake in the AI company Anthropic, was liquidated for about $900 million this year. The total cash conversion from FTX’s assets is projected to be between $14.5bn and $15.8bn.

The restructuring plan has won the backing of all key FTX creditor groups and includes a $200mn cash resolution of a $24bn claim by the Internal Revenue Service, the US taxation authority.

Following the bankruptcy court’s sanction of the proposed plan, stakeholders are slated to cast their vote on its terms before a conclusive hearing is held by the court for official confirmation.

The monetary recuperations are computed based on the crypto value as of the date FTX declared bankruptcy. In the six months leading up to November 2022, Bitcoin, the most extensively exchanged cryptocurrency, had slumped by over 50%.