Court Approves FTX’s $16.5 Billion Bankruptcy Plan to Repay Defrauded Customers

FTX has received court approval for its $16.5 billion bankruptcy plan, paving the way for the defunct crypto exchange to repay its defrauded customers in cash with interest. Payments are expected to begin within 60 days after the plan is enacted.

Bankruptcy Plan Approved

U.S. Bankruptcy Judge John Dorsey approved the plan, which involves creditors from over 200 jurisdictions, during a hearing in Wilmington, Delaware. The plan hinges on settlements with FTX customers, creditors, U.S. government agencies, and international liquidators.

The approved plan prioritizes FTX customers, allowing their claims to be addressed first, ahead of those from government regulators. The FTX collapse affected approximately 9 million customers and investors, resulting in substantial financial losses.

Customer Reimbursements

According to a statement from the company, 98% of FTX customers are expected to receive nearly 119% of their account value as of November 2022. The repayment process will commence within 60 days of the plan taking effect. However, separate announcements will be made regarding the distribution of assets held by debtors in the Chapter 11 bankruptcy filing.

Alex Thorn, head of research at Galaxy, mentioned that around $1.1 billion will be distributed this year to creditors with claims under $50,000. The remaining repayments are projected to occur between the first and second quarters of 2025.

FTX’s recovery of lost assets, including proceeds from asset sales, made this outcome possible.

Interest Payments and Asset Sales

Although FTX expects to recover up to $16.5 billion in total, this amount may drop to $14.7 billion following cash conversions. The estate also raised additional funds by selling stakes in technology firms, such as the AI startup Anthropic.

FTX’s CEO John Ray emphasized that all bankruptcy claims, except for non-governmental creditors, will include interest.

Repayments will be made in cash, as returning the original cryptocurrency is not feasible due to the misappropriation of assets by FTX’s founder, Sam Bankman-Fried (SBF). SBF, who was sentenced to 25 years in prison for defrauding customers, filed an appeal on September 13, alleging misconduct during his trial.