FTX has announced that it will begin offering compensation to almost all of its customers, less than two years after the cryptocurrency exchange’s dramatic failure. In a recent court filing, FTX said it owes creditors about $11.2 billion but has between $14.5 billion and $16.3 billion available for distribution.
According to documents filed in the U.S. Bankruptcy Court for the District of Delaware, the plan not only covers the entire claim but also includes additional interest payments at a 9% rate, assuming remaining funds are available. Such partial compensation may offer little comfort to investors who suffered significant losses in the exchange collapse. When FTX filed for bankruptcy in November 2022, Bitcoin was worth about $16,080. Since then, the price of Bitcoin has risen to around $62,675, which represents significant potential losses for those who have maintained their cryptocurrency investments.
Under the proposed plan, customers and creditors with claims of up to $50,000 would receive compensation of approximately 118% of the amount claimed, or nearly 98% of FTX customers. Our ability to resolve these claims will primarily come through successful liquidation of assets related to Alameda Research or FTX Ventures and litigation claims.
At its peak, FTX was the third largest global cryptocurrency exchange. The rapid decline began with a financial crisis similar to the bank’s run, leading to a bankruptcy filing in November 2022. FTX founder and CEO Sam Bankman-Fried resigned following his bankruptcy and was later sentenced to 25 years in prison for his role in March. FTX massive fraud case.
The aftermath of the scandal has led to a decline in support from several celebrities, including those from celebrities like Tom Brady and Stephen Curry. John Ray III, known for his work during the Enron collapse, later took over as CEO of FTX and announced plans to potentially revive the FTX.com exchange while exploring other strategic options.
Despite the controversy, FTX’s new management remains optimistic, and Ray expressed satisfaction with the proposed Chapter 11 plan, which will fully satisfy the claims of non-governmental creditors with additional interest.
Meanwhile, the story of cryptocurrency mismanagement has extended to Binance, the largest cryptocurrency exchange, where former CEO Changpeng Zhao was recently sentenced to prison for allowing illegal activity through the platform. Binance considered buying FTX just before the 2022 crash, but withdrew due to new financial issues.
A bankruptcy court will review FTX’s asset allocation plan on June 25, potentially turning a new page for the beleaguered exchange.
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