FTX has gained court approval for its bankruptcy plan, enabling it to repay customers using up to $16.5 billion in recovered assets. During a hearing in Wilmington, Delaware, U.S. Bankruptcy Judge John Dorsey approved the plan, praising it as a model for resolving complex Chapter 11 bankruptcy cases.
The approved plan is based on settlements with FTX customers, creditors, U.S. government agencies, and liquidators handling operations outside the U.S. FTX will prioritize customers, aiming to repay 98% of those holding $50,000 or less on the exchange. These repayments are expected to be completed within 60 days after the plan’s effective date, which remains pending.
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Collapse and Asset Recovery
FTX, once a major player in the cryptocurrency market, collapsed after it was discovered that founder Sam Bankman-Fried misused customer funds to finance risky bets through his hedge fund, Alameda Research. Bankman-Fried was found guilty of embezzling customers and handed a 25-year prison term in March, which he has challenged.
The company is in a dialogue with the U. S. Department of Justice over $1 billion that was frozen at the time of Bankman-Fried’s trial. Management suggested that shareholders, who usually do not get anything in bankruptcy cases, could get as much as $230m from these seized funds, as seen in the court papers.
FTX has estimated between $14.7 billion and $16.5 billion available to repay creditors. This sum should enable the corporation to refund at least 118% of the value held in client accounts as of November 2022, when FTX declared bankruptcy. U.S. institutions, including the Commodity Futures Trading Commission and the Internal Revenue Service, have agreed to allow FTX to prioritize consumer repayment above fines and tax responsibilities.
Mixed Reactions from Customers
Despite the progress, many customers have expressed disappointment, feeling they missed out on a significant rise in cryptocurrency prices since FTX’s collapse. Some object to the repayment plan, citing the significant rise in Bitcoin’s value from $16,000 in November 2022 to over $63,000 today. FTX, however, emphasized that it cannot return the cryptocurrency customers initially deposited, as much of it was misappropriated by Bankman-Fried.
Also Read: Prosecutors Seek 5-7 Years for Former FTX Exec Ryan Salame
