Bitcoin
FTX Clients Prepared to Recover All Funds Lost in Collapse
Customers of the failed cryptocurrency exchange FTX are prepared to recover all the money they lost when the company went bankrupt in 2022 and receive additional interest, the company’s bankruptcy lawyers said Tuesday.
The announcement was a milestone in the attempt to recover the $8 billion in client assets that disappeared when FTX imploded virtually overnight, triggering a crisis in the crypto industry. Under a plan filed in federal bankruptcy court in Delaware, virtually all of FTX’s creditors, including hundreds of thousands of ordinary investors who used the exchange to buy and sell cryptocurrencies, would receive cash payments equivalent to 118% of the assets they held. stored in FTX. said the lawyers.
Those payments would come from a pool of assets that FTX’s lawyers had gathered in the 17 months since the exchange’s collapse, the lawyers said.
But the recoveries come with a caveat. The amount owed to customers was calculated based on the value of their holdings at the time of FTX’s bankruptcy in November 2022. This means that customers will not reap the benefits of a recent surge in the crypto market that sent the Bitcoin price to a record. A customer who lost a Bitcoin when FTX imploded, for example, would be entitled to less than $20,000, even though a Bitcoin is now worth more than $60,000.
It will take months for payments to begin. The plan must be approved by the federal judge overseeing FTX’s bankruptcy, John T. Dorsey.
Still, a big recovery of customers’ money seemed unlikely when FTX collapsed after a run on deposits. Before its implosion, customers used FTX as a marketplace to buy and sell digital currencies and stored billions of dollars worth of crypto on the platform.
After the implosion, FTX founder and chief executive Sam Bankman-Fried stepped down, handing control over to John J. Ray III, a veteran of corporate turnarounds who oversaw the unraveling of Enron.
Mr. Bankman-Fried was later convicted of a comprehensive fraud in which he diverted billions of dollars in client savings to finance risky investments, political donations and other spending. He was condemned to 25 years in prison in March.
After taking over, Mr. Ray described the company as the biggest mess he had already seen it. But over the next few months, he and his team began the painstaking process of locating the missing property.
Some of the recoveries resulted from successful investments Mr. Bankman-Fried made during his tenure at FTX. In 2021, the company invested US$500 million in artificial intelligence company Anthropic. A boom in the AI industry has made these stocks much more valuable. This year, Ray’s team sold about two-thirds of FTX’s stake for $884 million.
FTX also reached an agreement to recover more than $400 million in Capital Module, a hedge fund financed by Mr. Bankman-Fried. And FTX lawyers have filed lawsuits to recover funds from former company executives and others, including Mr. country.
Crypto experts have been expecting significant recoveries from the FTX bankruptcy for months. Some opportunistic investors They bought bankruptcy filings from exchange customers for pennies on the dollar, hoping to profit when payments begin.