The approval was granted by US Bankruptcy Judge John Dorsey during a hearing in Wilmington, Delaware. Dorsey described the case as a benchmark for handling a complex Chapter 11 bankruptcy. The approved plan includes several settlements with various stakeholders, including FTX creditors, customerrs, US government agencies, and liquidators managing the company’s non-US operations. Under these settlements, FTX will prioritise repaying its customers from the recovered assets, before addressing claims from regulators.
The company aims to repay 98% of customers who held USD 50,000 or less on the platform, with payments expected within 60 days after the plan's effective date, which has yet to be set.
FTX, once a prominent cryptocurrency exchange, collapsed after it was revealed that founder Sam Bankman-Fried had used customer funds to cover risky bets made by his hedge fund, Alameda Research. In March, Bankman-Fried was sentenced to 25 years in prison, though he has since appealed the decision.
The company is still negotiating with the US Department of Justice over USD 1 billion seized during Bankman-Fried’s criminal prosecution. Shareholders of FTX, who would typically receive nothing in a bankruptcy case, may see up to USD 230 million from the funds seized by the government, based on court documents.
According to Reuters, FTX estimates it will have between USD 14.7 billion and USD 16.5 billion available to repay creditors. This amount is expected to cover at least 118% of the value of customer accounts as of November 2022, when FTX filed for bankruptcy. US government agencies, including the Commodity Futures Trading Commission (CFTC) and Internal Revenue Service (IRS), have agreed to allow FTX to prioritise customer repayment over regulatory fines and taxes. A Bahamian-appointed liquidator has also agreed to cooperate, having initially contested FTX's authority to file for bankruptcy in the US.
Despite the approval of the plan, Reuters reports that some customers have expressed dissatisfaction, as some feel they have missed out on gains from the recent surge in cryptocurrency prices.
FTX has defended its decision, stating that it is impossible to return the exact crypto assets customers deposited, as most were misused by Bankman-Fried. At the time of filing, FTX.com reportedly held only 0.1% of the bitcoin its customers believed they had on the platform. One of FTX’s advisers explained that it would be prohibitively expensive to repurchase sufficient crypto assets to repay customers in kind.
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