Customers of failed cryptocurrency exchange FTX are poised to reclaim all the money they lost when the company collapsed in 2022 and receive interest on top of it, the company's bankruptcy lawyers said Tuesday.
The announcement was a milestone in the effort to recover the $8 billion in customer funds that disappeared when FTX imploded virtually overnight, causing a crisis in the crypto industry. Under a plan filed in federal bankruptcy court in Delaware, virtually all of FTX's creditors, including hundreds of thousands of ordinary investors who used the exchange to buy and sell cryptocurrencies, would receive cash payments equal to 118 percent of the assets they stored on FTX . said the lawyers.
These payments would come from a collection of assets that FTX's lawyers have amassed in the 17 months since the stock market collapsed, the lawyers said.
But the recoveries come with a caveat. The amount owed to customers was calculated based on the value of their assets at the time of FTX's bankruptcy in November 2022. That means customers won't reap the benefits of a recent crypto market boom that price of Bitcoin to a record high. For example, a customer who lost one Bitcoin when the FTX imploded would be entitled to less than $20,000, even though a Bitcoin is now worth more than $60,000.
It will take months for payouts to begin. The plan must be approved by the federal judge overseeing FTX's bankruptcy, John T. Dorsey.
Still, a major recovery in customer money looked unlikely when the FTX collapsed after a run on deposits. Before the implosion, customers used FTX as a marketplace to buy and sell digital currencies and stored billions of dollars of crypto on the platform.
After the implosion, FTX founder and CEO Sam Bankman-Fried resigned and handed control to John J. Ray III, a corporate turnaround veteran who oversaw Enron's resolution.
Mr Bankman-Fried was later convicted of large-scale fraud in which he siphoned off billions of dollars in customer savings to fund venture investments, political donations and other expenses. He was convicted to 25 years in prison in March.
After taking over, Mr. Ray described the company as the biggest mess he had ever seen. But over the next few months, he and his team began the arduous process of locating the missing belongings.
Some of the recoveries resulted from successful investments made by Mr Bankman-Fried during his FTX term. In 2021, the company had invested $500 million in artificial intelligence company Anthropic. A boom in the AI industry made those stocks much more valuable. This year, Mr. Ray's team sold about two-thirds of FTX's stake for $884 million.
FTX also reached a deal that would see more than $400 million recovered Modulo capital, a hedge fund that Mr. Bankman-Fried had financed. And lawyers for FTX have filed lawsuits to recover money from former company executives and others, including Mr. Bankman-Fried. parents.
Crypto experts have been expecting a significant recovery from the FTX bankruptcy for months. Some opportunistic investors have been buying bankruptcy claims from the exchange's customers for pennies on the dollar, hoping to make a profit when payouts begin.