Under the FTX repayment plan, the exchange will repay almost all of its customers the money that they are owed, and some will get interest with it, CBS News reported.
In the amended FTX repayment plan filed in a US bankruptcy court, FTX will distribute an estimated $14.5 - $16.3 billion to customers and other creditors globally. After paying claims in full, the FTX repayment plan provides for additional interest payments if any funds remain. For most creditors, the interest rate is 9%.
A small consolation
This is a minute consolation for people who were trading cryptocurrency on FTX when it collapsed. Bitcoin was trading for just over $16,000 when FTX filed for bankruptcy in November 2022. Since then, the crypto market has recovered, and crypto prices have soared.
The FTX repayment plan failed to take into account that Bitcoin is currently changing hands for $61,345. That comes to a loss of almost 290% under the FTX repayment plan or slightly less if you count accrued interest. That's assuming the investors had held onto their Bitcoin.
Creditors and customers who claim less than $50,000 will get around 118%, according to the FTX repayment plan. This covers the vast majority of FTX customers.
According to the exchange, it clawed back funds by selling a collection of assets consisting mostly of proprietary investments held by FTX Ventures or Alameda and litigation claims.
The collapse and its aftermath
How did it come to the FTX repayment plan? On November 11, 2022, FTX filed for Chapter 11bankruptcy, and Sam Bankman-Fried resigned as CEO. The exchange's bankruptcy filing listedover 130 affiliated companies worldwide. It valued its assets and its liabilities in the same range - $10 billion to $50 billion. Bitcoin lost 10% of its value on the news.
On December 13, Sam Bankman-Fried was charged with a large number of financial crimes. He was accused of intentionally deceiving investors and customers for his material gain and to enrich others and played a key role in FTX's multibillion-dollar collapse.
On December 22, his parents paid bail of $250 million so he could be released.He went to their California home to await trial. At this time, the FTX repayment plan was a mirage.
SBF was unable to relax at home, and he did not see the error of his ways. On August 11, 2023, a judge revoked his bail and sent him to jail. Apparently, he had been trying to influence witnesses to testify in his favor and threatening prosecution witnesses.
SBF took the stand on October 27.He denied having committed fraud but acknowledged his failures. This wasn't enough, and he was convicted of conspiracy and fraudon November 3. The court found he had stolen $10 billion or more from clients and investors. On March 28, 2024, he was sentenced to a quarter of a century in prison.
FTX repayment plan and future
FTX appointed a new CEO, John Ray III, who is a long-time bankruptcy litigator. He was successful in handling Enron's affairs after it collapsed. He spoke to the media about the FTX repayment plan, saying the company was "pleased to be in the position" to propose it. In his words, the plan only "contemplates" returning claims in full plus interest for non-government creditors.
Testimony before Congress, a Super Bowl ad, and endorsements from celebrities like quarterback Tom Brady are among the highlights of FTX's past. What about its future? At the beginning of last year, its new CEO said he had assembled a team to potentially revive the crypto exchange.
Hopefully, the newly structured organization will make good on the FTX repayment plan. As for relaunching, almost any company would hesitate considering the terrible details that emerged after FTX's assets were seized. However, crypto exchanges might work with different parameters.
Asset dispersion, according to the FTX repayment plan, will be reviewed by a bankruptcy court on June 25, 2024.
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