FTX Approved to Repay Billions

Key Takeaways:

• FTX to repay 98% of customers
• Customers upset over BTC at $63K.
• FTX held only 0.1% of BTC customers.
• Allocated $1 billion for repayments.

Repayment Plan & Customer Concerns

FTX’s bankruptcy plan, approved by the court on Monday, promises to repay 98% of customers with account balances of $50,000 or less. These customers are set to receive at least 118% of their account value as it stood in November 2022, with repayments expected to begin within 60 days. FTX estimates that $14.7 to $16.5 billion will be available for creditors.

However, many cryptocurrency holders, especially Bitcoin investors, are upset. Bitcoin has risen from $16,000 in November 2022 to over $63,000 today. Attorney David Adler, representing creditors, argues that FTX’s repayment plan uses outdated 2022 prices, ignoring current asset values. At the time of its bankruptcy, FTX.com held only 0.1% of the Bitcoin customers believed they had deposited.

In court, FTX advisor Steve Coverick explained that repurchasing enough cryptocurrency to repay customers would now be “exorbitantly expensive” due to the rise in prices, frustrating customers who expected repayment in crypto.

Legal Settlements and Asset Recovery

FTX reached settlements with U.S. government agencies, allowing it to prioritize customer repayments over fines and taxes. Bahamian liquidators, who initially opposed FTX’s bankruptcy filing in the U.S., have also agreed to cooperate.  FTX is also in negotiations with the U.S. Department of Justice regarding the $1 billion seized during the prosecution of Sam Bankman-Fried. As a result, shareholders, who usually do not receive anything in bankruptcy cases, could get up to $230 million from these seized funds.

In addition to these settlements, FTX has recovered billions in assets, including cash and cryptocurrencies. The company also sold off other investments, such as its stake in AI startup Anthropic, to raise more funds for customer repayments.

Background on FTX’s Collapse

In March 2024, Sam Bankman-Fried was sentenced to 25 years in federal prison for defrauding customers and investors of $8 billion through his failed crypto exchange, FTX. He misused customer funds to cover risky investments made by his hedge fund, Alameda Research, which contributed to FTX’s collapse in November 2022.