Most FTX customers will get their money back under proposed plan
Nearly all customers of FTX will get their money back, plus interest, after the cryptocurrency exchange imploded 17 months ago.
FTX, which filed for bankruptcy protection in November 2022, said in a court filing Tuesday that between $14.5 billion and $16.3 billion would be available for distribution.
Under the proposed plan, customers and creditors owed $50,000 or less will get about 118% of their claim, according to the filing with the U.S. Bankruptcy Court for the District of Delaware. That covers about 98% of FTX customers.
After paying claims in full, the plan provides for supplemental interest payments to the extent that funds remain. The interest rate for most creditors is 9%.
Although customers will be reimbursed the cash value of their cryptocurrency assets at the time of FTX’s collapse plus some interest, that’s far short of how much money those assets would be worth today given crypto’s resurgence. The price of bitcoin today, for instance, is about three times what it was in November 2022.
What is FTX?
FTX was co-founded in 2019 by Sam BankmanFried, once considered the golden boy of the crypto industry. As chief executive, he grew the exchange into one of the largest in the world, with more than 1 million users at its peak and endorsements from celebrities including former NFL quarterback Tom Brady and NBA star Stephen Curry.
Bankman-Fried, 32, was hailed as a positive force and trustworthy spokesperson for the emerging industry, especially as he rescued several failing
crypto firms.
What happened to FTX?
FTX failed in spectacular fashion when users, worried about the exchange’s solvency, began pulling out their money en masse in 2022. The collapse triggered outflows across other global crypto exchanges, leading to a catastrophic fiasco.
FTX had a staggering shortfall at the time of its Chapter 11 filing, holding only 0.1% of the bitcoin and 1.2% of the ethereum that customers believed it held, the company said in an announcement Tuesday.
What about Bankman-Fried?
Bankman-Fried was arrested in the Bahamas in December 2022 and extradited to the U.S., where he faced criminal charges. Eleven months later, a jury in federal court in Manhattan convicted him of fraud in a scheme that cheated customers and investors out of at least $10 billion.
Prosecutors said Bankman-Fried had misappropriated funds to fuel his quest for influence and dominance in the crypto world, and had illegally used money from FTX depositors to cover his expenses, which included luxury properties in the Caribbean, alleged bribes to Chinese officials and private planes.
“His crimes caught up to him. His crimes have been exposed,” Assistant U.S. Atty. Danielle Sassoon said during the trial. Sassoon said Bankman-Fried turned customer accounts into his “personal piggy bank” as up to $14 billion disappeared.
In March, BankmanFried
was sentenced to 25 years in prison. It was a stunning downfall for a man who was once estimated to be worth $26 billion.
Where is the reimbursement money coming from?
The billions available to repay defrauded customers includes assets under the control of the debtors, the U.S. Department of Justice, authorities in Australia and the Bahamas as well as dozens of private parties.
“FTX has achieved this recovery level by monetizing an extraordinarily diverse collection of assets, most of which were proprietary investments held by the Alameda or FTX Ventures businesses, or litigation claims,” the company said.
The plan still has to be finalized in U.S. Bankruptcy Court.