FTX has secured court approval for its bankruptcy plan, paving the way for the crypto exchange to fully repay customers using up to $16.5 billion in recovered assets. U.S. Bankruptcy Judge John Dorsey approved the plan during a court hearing in Wilmington, Delaware, describing FTX’s case as “a model case for how to deal with a very complex Chapter 11 bankruptcy proceeding.”
The approved plan centers on a series of settlements involving FTX’s customers and creditors, U.S. government agencies, and liquidators responsible for winding down FTX’s operations outside the United States. Under this framework, FTX will prioritize customer repayments before addressing competing claims from government regulators. The exchange aims to reimburse 98% of its customers—those holding $50,000 or less—within 60 days of the plan’s effective date, which is yet to be determined.
Once a leading player in the crypto market, FTX’s downfall began after revelations that founder Sam Bankman-Fried had used customer funds to cover risky bets made by his hedge fund, Alameda Research. Bankman-Fried was sentenced to 25 years in prison in March for his role in the theft, a conviction he is currently appealing.
FTX is also engaged in discussions with the U.S. Department of Justice regarding approximately $1 billion seized during the criminal prosecution of Bankman-Fried. According to court documents, shareholders—who typically receive nothing in bankruptcy proceedings—could potentially obtain up to $230 million from these seized funds.
The exchange estimates that it will have between $14.7 billion and $16.5 billion available for creditor repayments, sufficient to offer customers at least 118% of the value in their accounts as of November 2022, the date of its bankruptcy filing. U.S. government agencies, including the Commodity Futures Trading Commission and the Internal Revenue Service, have agreed to allow FTX to prioritize customer repayment over fines and tax obligations.
FTX views the approval as a victory for creditors, highlighting its success in recovering funds that were lost during the tumultuous collapse of the company. The firm also raised additional capital by liquidating assets, including its investments in technology companies like the artificial intelligence startup Anthropic.
Despite the positive developments, customer reactions have been mixed, with some expressing disappointment over the missed opportunities to capitalize on the recent surge in crypto prices. Many customers have voiced objections, seeking higher repayments to reflect the rising values of cryptocurrencies. David Adler, an attorney representing objecting creditors, noted that Bitcoin’s price has surged from around $16,000 in November 2022 to over $63,000 currently, leading customers to question FTX’s claim of a 100% recovery based on outdated valuations.
FTX clarified that returning the exact crypto assets deposited by customers is unfeasible due to misappropriation by Bankman-Fried. At the time of its bankruptcy filing, FTX.com only held 0.1% of the Bitcoin customers believed they had deposited. Financial adviser Steve Coverick testified on Monday that it would be “exorbitantly expensive” to acquire billions in crypto assets on the open market to match customers’ original deposits.
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