FTX, in collapse, vows full repayment to most creditors

FTX, the cryptocurrency exchange that collapsed in November 2022, announced late Tuesday that it has amassed sufficient assets to fully reimburse most of its creditors, according to a proposed reorganization plan.

The company stated, “The plan contemplates payment in full of all non-governmental creditors based on the value of their claims as determined by the bankruptcy court.” The plan is awaiting approval from a US court and aims to settle disputes with both governmental and private stakeholders without engaging in lengthy and expensive legal battles.

The crash of FTX had a profound impact on the cryptocurrency industry, triggered by a rapid withdrawal of funds by depositors. Following the collapse, founder Sam Bankman-Fried stepped down as CEO and the company declared bankruptcy.

In a significant legal development, Bankman-Fried was convicted in March on multiple counts of fraud and conspiracy, which included stealing billions from FTX customer accounts and misleading lenders to Alameda Research, a related hedge fund. He received a 25-year prison sentence.

FTX has managed to recover assets valued between $14.5 billion and $16.3 billion, which were associated with the exchange at the time of its failure.

John J. Ray III, who assumed the role of CEO in November 2022 to manage the company’s bankruptcy process, has a history of handling major corporate liquidations, including Enron. Upon taking over, he described FTX as the most significant disaster he had encountered.

In the recent statement, Ray expressed satisfaction with the proposed bankruptcy plan, stating, “We are pleased to be in a position to propose a Chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors.”

If the plan receives the necessary judicial approval from the United States Bankruptcy Court for the District Court of Delaware, FTX anticipates that 98% of its creditors will receive about 118% of the value of their approved claims.