The U.S. Bankruptcy Court for the District of Delaware has officially approved the reorganization plan for FTX, the bankrupt crypto exchange platform. This move is part of the company’s efforts to compensate affected customers.
According to an official statement on Monday (October 7, 2024), Judge John Dorsey approved FTX’s liquidation plan, allowing the company to use its assets to pay compensation to approximately 98% of customers who had balances of less than $50,000 on the platform. These payments are expected to be made within 60 days of the plan’s effective date, which has yet to be determined.
The company estimates it will have between $14.7 billion and $16.5 billion in funds to cover compensation. This amount is believed to be sufficient to cover around 118% of customer balances at the time of FTX’s collapse in November 2022.
FTX, once one of the largest crypto exchanges globally, collapsed after it was revealed that founder Sam Bankman-Fried had used customer funds to cover losses incurred by its affiliate company, Alameda Research. Several FTX executives are now facing prison sentences for their involvement in the scandal. Caroline Ellison, former CEO of Alameda Research, was sentenced to two years in prison in September 2024, while Bankman-Fried himself faces a 25-year sentence.
FTX is still in discussions with the U.S. Department of Justice (DOJ) regarding $1 billion in funds seized during the legal process against Bankman-Fried. According to court documents, FTX shareholders, who typically do not receive returns in bankruptcy proceedings, could obtain up to $230 million from these seized funds.
FTX Breathes a Sigh of Relief
Following the court’s decision, FTX stated that the approval marks a major victory for creditors. The company claims this effort was driven by its ability to recover lost cash and crypto assets during the collapse, including raising additional funds through the sale of its assets, such as investments in various tech companies.
“The court’s confirmation of our plan is a significant milestone in our effort to distribute funds to customers and creditors,” said FTX CEO John J. Ray III.
Looking ahead, Ray added that the company plans to return 100% of bankruptcy claims, plus interest, to non-government creditors. The company is currently finalizing arrangements to distribute funds to creditors in more than 200 jurisdictions worldwide.
“We are now finalizing agreements to recruit special agents who will help us distribute funds to customers globally, safely and quickly. I want to thank all FTX customers and creditors for their patience throughout this process,” Ray concluded.
Dissatisfaction Among Some Parties
Although the plan ensures that the majority of creditors and users will recover their funds, not everyone is satisfied. Some have criticized FTX’s plan for not considering the increase in crypto token values between November 2022 and 2024.
Sunil Kavuri, an FTX creditor who attended the bankruptcy hearing, pointed out that users will only receive 10% to 25% of the value of the crypto they held.
FTX is allocating 18% of the DOJ-forfeited funds, up to $230 million, to its equity holders (as outlined in the plan supplement). Meanwhile, FTX crypto holders will recover between 10% to 25% of their cryptocurrency holdings — Sunil (FTX Creditor Champion) (@sunil_trades) September 28, 2024 When FTX filed for bankruptcy in 2022, Bitcoin was priced around $16,000, but it has since surged to over $62,000.
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