FTX aims to repay its customers in full

Thursday 1 February 2024 12:15 CET | News

Cryptocurrency exchange FTX has revealed its intention to repay its customers in full as long as they can prove their losses.


Specifically, FTX has informed the overseeing judge in its insolvency case that customers and creditors with verifiable losses are likely to recover their entire funds. Attorney Andrew Dietderich, representing the restructuring advisers, stated during a court hearing in Wilmington, Delaware, that an extensive examination of the numerous claims against FTX is underway to filter out illegitimate ones. 

Dietderich emphasised that the assurance should be viewed as an objective rather than a guarantee, highlighting the ongoing efforts and associated risks. Despite dropping plans to restart or sell the FTX crypto exchange, he further explained that the company's team had explored options extensively but failed to secure investors willing to inject the required capital for revival. 

Referring to founder Sam Bankman-Fried, who relinquished control to insolvency experts in late 2022, Dietderich mentioned the impractical costs and risks associated with resurrecting the exchange from its existing state. Since taking control, restructuring advisers have been identifying assets and navigating a complex debt structure owed to various creditors, including platform users who deposited cash and cryptocurrencies. 

According to Yahoo, FTX's four largest affiliates substantially increased the cash reserves to USD 4.4 billion by the end of 2023, up from approximately USD 2.3 billion in late October. In a court hearing seeking approval for determining creditor and customer claims, US Bankruptcy Judge John Dorsey ruled that the size of each claim would be based on the owed amount on the day FTX filed for bankruptcy. Dorsey also approved rules for estimating the owed amounts, rejecting complaints from some customers who argued for claims based on late 2022 prices to account for the rise in digital asset values. The case is filed under FTX Trading Ltd., 22-11068, in the US Bankruptcy Court for the District of Delaware.


Cryptocurrency exchange FTX has revealed its intention to repay its customers in full as long as they can prove their losses.


What happened to FTX?

FTX, a bankrupt company that operated a cryptocurrency exchange and hedge fund, faced serious headwinds in November 2022 after Coindesk revealed that its partner firm held a significant portion of assets in FTX's native token. Binance's decision to sell its FTT holdings caused customer withdrawals, and Binance considered acquiring FTX but backed down due to reports of mishandled customer funds and US investigations.   

FTX filed for Chapter 11, and its collapse highlighted the need for stricter regulations. FTX's founder, Sam Bankman-Fried, was later arrested for financial offences. Douwe Lycklama, founding partner at INNOPAY, detailed for The Paypers the context that led to the FTX collapse, presenting the important lessons that the crypto and larger economic market should learn and act on in the coming future. 

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Keywords: cryptocurrency, cryptocurrency exchange, regulation, digital assets
Categories: DeFi & Crypto & Web3
Companies: FTX
Countries: United States
This article is part of category

DeFi & Crypto & Web3


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