FTX, once a giant in the crypto exchange world, has cleared a major hurdle in its bankruptcy proceedings. On Monday, a US bankruptcy court approved its plan to pay customers using up to $16.5 billion in acquired assets. The approval marks a victory in the company’s efforts to correct the mistakes that caused its downfall.
US Bankruptcy Judge John Dorsey, who presided over the case, called the FTX decision a “model case” for handling such complex Chapter 11 petitions. The approval gives hope to FTX customers, many of whom have been waiting since 2022 to get their money back.
FTX AUTHORIZED TO RETURN CUSTOMERS MID-LIFE FOR $1 BILLION SEIZED TAXES
– A US bankruptcy judge has approved a plan for FTX to pay customers more than $12.6 billion after its digital assets were locked up on the platform following its collapse in November 2022.
– FTX is in talks with… pic.twitter.com/TWjNV1BHAP
– BSCN (@BSCNews) October 7, 2024
The Return Program: A Sophisticated Package for Consumers
FTX will pay approximately 98% of account holders with less than $50,000 on the platform with this payout. The plan will start paying after 60 days of being active. Although it sounds good to those customers, not all are satisfied. Because the prices are based on cryptocurrency prices from November 2022 and it was the month when FTX fell, they feel they got the bad end of the deal.
As of today, the market cap of cryptocurrencies stood at $2.12 trillion. Chart: TradingView.com
Bitcoin was only worth about $16,000 at the time. On this current day, the value of bitcoin has risen above $63,000. Some buyers, supported by lawyer David Adler, argue that, given the current value of cryptocurrencies, FTX’s claim of a 100% return does not accurately represent their losses. However, FTX says that since the founder Sam Bankman-Fried does not manage those assets properly, it is not possible to simply return the money from the cryptocurrency deposit.
The Part Played by Bankman-Fried and What FTX Achieved
The catastrophic collapse of FTX was largely due to the efforts of Sam Bankman-Fried. The founder earlier this year was sentenced to 25 years in prison for using clients’ money to fund high-risk bets made by his hedge fund, Alameda Research. When FTX announced it was broke, it didn’t have the 0.1% of bitcoin its users believed they had.
The new management of FTX has been looking for missing assets ever since. They have successfully recovered billions of dollars in cryptocurrency and cash. Income from the sale of shares in businesses such as AI company Anthropic was among the sources of this money. As a result of this effort, FTX calculated that it could pay creditors between $14.7 billion and $16.5 billion.
Victory for Others, But Dissatisfaction Remains
While the regression is positive, problems remain. With the additional $1 billion seized in the Bankman-Fried criminal investigation, the FTX, and the US Department of Justice are still at odds on many things. The forfeiture could end up guaranteeing up to $230 million to shareholders, who would have benefited nothing from bankruptcy.
Despite the progress, some clients feel like they are missing out on the current cryptocurrency boom. Since the market crash in 2022, the value of cryptocurrencies has increased by a large amount. Many people lose more than just money when FTX goes down; they also missed their chance to make money when the market pulled back.
Featured image from the Economic Times, chart from TradingView