May 13, 2024
By Anjali Kochhar
Unexpectedly, the troubled cryptocurrency exchange FTX has unveiled a reorganisation proposal that would give its creditors a sizable return of their money. In a court filing, FTX states that, although it has between $14.5 billion and $16.3 billion available for distribution, it believes it owes creditors about $11.2 billion.
Under the proposed plan, customers with claims amounting to $50,000 or less will receive approximately 118% of their allowed claim. Remarkably, around 98% of creditors fall into this category, indicating that the vast majority of customers could see a full recovery of their funds, and possibly even more.
This news provides hope to FTX consumers who have faced financial uncertainty since the exchange filed for bankruptcy protection in November 2022. The problem was aggravated by the conviction of FTX’s founder, Sam Bankman-Fried, on seven criminal offences, including embezzling billions of dollars from consumers. Bankman-Fried received a lengthy 25-year prison sentence.
FTX managed to secure the necessary funds for compensation by selling off various assets, including venture investments held by the exchange and other investments managed by Alameda, Bankman-Fried’s crypto hedge fund. Notably, FTX’s divestment included a significant stake in Anthropic, an artificial intelligence firm backed by Amazon, which yielded nearly $900 million.
However, FTX faced challenges in recovering additional funds due to a large sum of missing cryptocurrency from the exchange. Despite the substantial appreciation of crypto prices since November 2022, FTX was unable to benefit from this uptrend. Consequently, the exchange had to explore alternative avenues to repay creditors, as highlighted in a press release issued on Wednesday.
Following Bankman-Fried’s resignation, FTX selected John Ray III as CEO. Ray, a seasoned figure with four decades of legal and restructuring experience, was shocked by the amount of corporate mismanagement and a lack of financial transparency at FTX. Nonetheless, he expressed confidence in the planned reorganisation plan, citing the pledge to completely compensate non-governmental creditors with interest.
In the turbulent voyage of FTX, the announcement of its reorganisation plan is a significant turning point. Even while there are still obstacles to overcome, such as getting the bankruptcy court’s consent, the possibility that the majority of consumers would get their money back provides some comfort and resolution in an otherwise uncertain and turbulent legal journey.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.
