Customers of failed cryptocurrency exchange FTX are prepared to recover all the money they lost during the company's collapse in 2022, plus interest, the company's bankruptcy lawyers announced on Tuesday.
The announcement marks a milestone in FTX's attempt to recover the $8 billion in customer assets that disappeared when it collapsed virtually overnight, sparking a crisis in the crypto industry. According to a plan filed in U.S. Bankruptcy Court in Delaware, virtually all of FTX's creditors, including the hundreds of thousands of retail investors who used the exchange to buy and sell cryptocurrencies, will have to pay for their holdings on FTX. The company will receive a cash payment equal to 118% of its assets. the lawyers said.
These payments flow from a pool of assets that FTX's lawyers have amassed in the 17 months since the exchange collapsed, lawyers said.
However, there are some caveats to recovery. The amount owed to customers was calculated based on the value of assets held at the time of FTX's bankruptcy in November 2022. This means customers will not be able to benefit from the recent crypto market rally that has pushed Bitcoin prices to record levels. expensive. For example, a customer who lost 1 Bitcoin when FTX collapsed will be entitled to receive less than $20,000, even though 1 Bitcoin is currently worth more than $60,000 to him.
It will take several months for payments to begin. The plan must be approved by John T. Dorsey, the federal judge overseeing FTX's bankruptcy.
Still, when FTX collapsed after running out of deposits, it seemed unlikely that customer funds would recover significantly. Before the collapse, customers used his FTX as a marketplace to buy and sell digital currencies and stored billions of dollars of cryptocurrencies on the platform.
After the implosion, FTX founder and CEO Sam Bankman Freed resigned and handed over control to John J. Ray III, a corporate turnaround veteran who oversaw the unwinding of Enron. Ta.
Bankman Fried was later convicted of a massive fraud that siphoned billions of dollars from customers' savings to fund venture investments, political contributions and other expenditures. He was sentenced to 25 years in prison in March.
After taking over, Ray said it was the biggest disruption the company had ever seen. But over the next few months, he and his team began the painstaking process of tracking down the missing assets.
Part of the payback was due to successful investments made by Bankman Fried during his tenure at FTX. The company had invested $500 million in artificial intelligence company Anthropic in 2021. The boom in the AI industry has made these stocks even more valuable. This year, Ray's team sold about two-thirds of its FTX stock for $884 million.
FTX also reached a deal to recover more than $400 million from Bankman Fried's hedge fund, Modulo Capital. FTX's lawyers also filed a lawsuit to recover funds from former executives, including Bankman Fried's parents.
Cryptocurrency experts have been hoping for a strong recovery from the FTX bankruptcy in recent months. Some opportunistic investors are buying bankruptcy debt from exchange customers for $1, hoping to make a profit once payments start.
