Customers of the failed cryptocurrency exchange FTX are set to receive a major windfall as they are poised to recover all of the money they lost when the firm collapsed in 2022, along with interest on top of it, according to the company’s bankruptcy lawyers.
The announcement marks a significant milestone in the effort to recoup the $8 billion in customer assets that vanished when FTX imploded, sending shockwaves through the crypto industry. Under a plan filed in federal bankruptcy court in Delaware, nearly all of FTX’s creditors, including hundreds of thousands of ordinary investors who used the platform to trade cryptocurrencies, will receive cash payments equivalent to 118 percent of the assets they had stored on FTX, the lawyers revealed.
These payments will be funded by a pool of assets that FTX’s legal team has assembled over the past 17 months since the exchange’s collapse. However, there is a catch – the amount owed to customers was calculated based on the value of their holdings at the time of FTX’s bankruptcy in November 2022. This means that customers will not benefit from the recent surge in the crypto market that saw the price of Bitcoin reach record highs.
Despite the positive news, it will still take some time for the payouts to commence as the plan must first be approved by the federal judge overseeing FTX’s bankruptcy, John T. Dorsey.
The collapse of FTX came as a shock to many, with customers using the platform to trade digital currencies and storing billions of dollars in crypto on the exchange. Following the implosion, FTX’s founder and CEO, Sam Bankman-Fried, resigned and handed control to John J. Ray III, a seasoned expert in corporate turnarounds.
Mr. Bankman-Fried was later found guilty of a massive fraud scheme in which he diverted billions of dollars in customer funds to support various ventures, political contributions, and other expenses. He was subsequently sentenced to 25 years in prison.
Under Mr. Ray’s leadership, FTX’s team embarked on a comprehensive effort to locate the missing assets, resulting in successful investments made during Mr. Bankman-Fried’s tenure. The company’s stake in the artificial intelligence firm Anthropic, for example, proved to be highly lucrative, with a significant portion of the shares sold for $884 million this year.
Additionally, FTX secured a deal to recover over $400 million from Modulo Capital, a hedge fund backed by Mr. Bankman-Fried. Legal action was also taken to reclaim funds from former company executives and others, including the founder’s parents.
Crypto experts had long anticipated substantial recoveries in the FTX bankruptcy, with some investors purchasing bankruptcy claims from the exchange’s customers at discounted rates in hopes of profiting from the impending payouts.
