Major ruling clarifies $16 billion payment path in FTX bankruptcy saga

FTX, once a giant in the cryptocurrency exchange world, has cleared a major hurdle in its bankruptcy proceedings. On Monday, an American bankruptcy The court approved his plan to pay clients. using up to $16.5 billion in recovered assets. The approval signals a victory for the company’s efforts to correct the errors that caused its collapse.

U.S. Bankruptcy Judge John Dorsey, who is presiding over the case, called the FTX resolution “a model case” for handling such complex Chapter 11 filings. The approval offers hope for ftx clients, many of whom have been waiting since 2022 to recover their funds.

FTX APPROVED TO PAY CUSTOMERS AMID BATTLE OVER $1 BILLION OF CONFISCATED ASSETS

– A US bankruptcy judge approved a plan for FTX to refund its customers more than $12.6 billion after their digital assets were locked on the platform following its collapse in November 2022.

– FTX is in talks with… pic.twitter.com/TWjNV1BhAP

— BSCN (@BSCNews) October 7, 2024

The payback schedule: a complicated package for clients

FTX would pay approximately 98% of account holders with less than $50,000 on the platform through this agreement. The plan will initiate payment after 60 days of activation. Although it may seem nice to those customers, not everyone is satisfied. Because the values ​​are based on cryptocurrency prices from November 2022 and also happened to be the month FTX crashed, they feel like they are getting the raw end of the deal.

As of today, the market cap of cryptocurrencies stood at $2.12 trillion. Chart: TradingView.com

Bitcoin was only valued at about $16,000 at the time. Currently, the value of bitcoin has skyrocketed above $63,000. Some consumers, backed by attorney David Adler, argue that given the current value of cryptocurrencies, FTX’s claim of a 100% return does not accurately represent its losses. However, FTX claims that since founder Sam Bankman-Fried mismanaged those assets, it is not feasible to simply refund cryptocurrency deposits.

The role Bankman-Fried played and what FTX acquired

The disastrous collapse of FTX is largely due to the efforts of Sam Bankman-Frito. The founder was sentenced earlier this year to 25 years in prison for using client funds to finance high-risk bets made by his hedge fund, Alameda Research. When FTX filed for bankruptcy, it owned just 0.1% of the bitcoins its users thought they owned.

Since then, FTX’s new management has been searching for the missing assets. They have managed to recover billions of dollars in cryptocurrencies and cash. Among the sources of this cash were proceeds from the sale of stakes in companies such as the artificial intelligence company Anthropic. Thanks to this effort, FTX estimated that it could pay creditors between $14.7 billion and $16.5 billion.

A victory for some, but there is still dissatisfaction

Although the reversal is positive, there are still problems to be resolved. As for the additional $1 billion seized in the investigation into the Bankman-Fried crime, FTX and the U.S. Department of Justice have yet to reach an agreement on most issues. The seized money could secure up to $230 million for shareholders who would otherwise benefit nothing from a bankruptcy.

Although there have been improvements, some customers feel that they are missing out on the current rise of cryptocurrencies. Since the market crash in 2022, the value of cryptocurrencies has increased tremendously. Many people lost more than just money when FTX went down; They also lost the opportunity to make money when the market went up again.

Featured image from The Economic Times, chart from TradingView