The bankruptcy plan of FTX, the once-prominent cryptocurrency exchange, has been approved by the court. This plan will enable the exchange to compensate customers with up to $16.5 billion in recovered assets.
During a court hearing in Wilmington, Delaware, U.S. Bankruptcy Judge John Dorsey approved the plan, praising it as a model for managing complex bankruptcy cases. Settlements with FTX customers, creditors, government agencies, and international liquidators serve as the foundation of the strategy.
The primary objective of the strategy is to reimburse 98% of FTX’s consumers, with a particular emphasis on those who held $50,000 or less on the platform. The repayments are anticipated to be made within 60 days of the plan’s effective date, which has not yet been determined. Sam Bankman-Fried, the founder of FTX, was sentenced to 25 years in prison earlier this year for the misappropriation of customer funds, which caused the company’s collapse in 2022. Since then, he has filed an appeal against his conviction.
In spite of the bankruptcy plan’s objective to offer relief to the majority of customers, there has been a divided response. The repayments are based on 2022 prices, which is a source of disappointment for certain customers, particularly those who have deposited cryptocurrency such as Bitcoin, as the value of assets was significantly reduced at that time. For example, Bitcoin was only $16,000 at the time of the bankruptcy filing; however, it has since increased to more than $63,000.
David Adler, a lawyer who represents certain creditors, contended that FTX’s assertion of providing a 100% recovery does not account for the substantial increase in cryptocurrency prices that has occurred since the platform’s collapse. Nevertheless, FTX clarified that it is unable to restitute the original crypto assets due to the numerous instances of misappropriation.
FTX is currently in negotiations with the U.S. Department of Justice regarding an additional $1 billion in sequestered assets. The company has already recovered billions through asset sales and intends to provide creditors with up to 118% of the value of their accounts by November 2022. The court has rejected the return of cryptocurrency to consumers, instead emphasizing cash-based repayments, despite objections.
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