The plan prioritizes reimbursement of claims from FTX customers, ahead of competing claims from government regulators.
Source: cryptoslate
Compiled by: Blockchain Knight
Defunct crypto asset exchange FTX has received court approval for its bankruptcy plan, allowing it to use $16.5 billion in existing recovery assets to repay customers, Reuters reported Oct. 7.
U.S. Bankruptcy Judge John Dorsey approved the plan, which includes creditors from more than 200 jurisdictions, during a hearing in Wilmington, Delaware.
Meanwhile, the plan relies on settlements with FTX customers, creditors, U.S. government agencies, and international liquidators.
The plan prioritizes repaying claims from FTX customers, with competing claims from government regulators coming second.
Authorities estimate that FTX’s collapse left approximately 9 million customers and investors facing huge financial losses.
According to a statement released by FTX, as of November 2022, 98% of FTX's customers have received compensation, an amount close to 119% of total accounts.
The repayment process will begin within 60 days of the plan taking effect. However, the debtor filing for bankruptcy protection will separately announce the first distribution date of its currently held assets.
About $1.1 billion will be distributed this year to creditors with claims below $50,000, said Alex Thorn, head of research at Galaxy. The rest will be paid between the first and second quarters of 2025.
FTX noted that this achievement was made possible by the company’s recovery of assets lost during the company’s collapse.
FTX CEO John J. Ray III said in a statement that the approval of the plan is an important milestone.
He added: “The experienced and tireless team of professionals supporting this case have recovered billions of dollars by rebuilding FTX’s books from scratch and mobilizing assets from around the world from there.”
While the total value recovered could be as high as $16.5 billion, after cash conversion, the amount could drop to $14.7 billion.
Additional funds were raised through asset sales, including stakes in technology companies such as artificial intelligence startup Anthropic.
Ray III emphasized that, except for government creditors, all bankruptcy claims will be repaid with interest.
It is worth noting that the repayment was in cash because FTX stated that returning the original Crypto assets was not feasible because they had been misappropriated by the exchange’s founder, Sam Bankman-Fried.
Previously, Sam Bankman-Fried was sentenced to 25 years in prison for defrauding FTX customers. However, he filed an appeal on September 13, claiming that the trial was rife with improprieties.
