FTX, the once high-flying cryptocurrency exchange that imploded in November 2022, announced late Tuesday that it has recovered sufficient assets to pay back most of its creditors in full. The proposed reorganization plan, which requires approval from the U.S. Bankruptcy Court for the District of Delaware, aims to resolve disputes with governmental and private stakeholders without the need for costly and protracted litigation.
According to the court filing, FTX estimates that it owes creditors approximately $11.2 billion. However, the exchange has managed to recover assets valued between $14.5 billion and $16.3 billion, which it plans to distribute to creditors. Under the proposed plan, customers whose claims amount to $50,000 or less will receive approximately 118% of the allowed claim amount, with 98% of creditors expected to receive this compensation.
The announcement comes as a potential relief to FTX customers, whose funds have been locked up with the exchange since its bankruptcy filing in November 2022. The collapse of FTX sent shockwaves through the crypto world, leading to the resignation of its founder and CEO, Sam Bankman-Fried, who was later convicted on seven counts of fraud and conspiracy, including charges related to stealing billions of dollars from FTX's customers. In March, Bankman-Fried was sentenced to 25 years in prison.
FTX's ability to raise sufficient funds to repay creditors is largely attributed to the sale of various assets, including venture investments held by the exchange and investments held by Alameda, Bankman-Fried's crypto hedge fund. One of FTX's most notable investments was in the artificial intelligence firm Anthropic, backed by Amazon. The exchange sold most of its stake in Anthropic this year, generating nearly $900 million in proceeds.
The exchange had to explore alternative sources of recoverable value due to the significant amount of cryptocurrency missing from its platform. "Accordingly, the Debtors have not been able to benefit from the appreciation of these missing tokens during the chapter 11 cases. Instead, the Debtors have had to look to other sources of recoverable value to repay creditors," FTX stated in a press release on Wednesday.
Since FTX's bankruptcy filing in November 2022, cryptocurrency prices have experienced a massive appreciation, with Bitcoin rising by approximately 270%. This appreciation, however, did not directly benefit FTX due to the missing tokens.
Following Bankman-Fried's departure, FTX appointed John Ray III as its new CEO. In November 2022, Ray, a seasoned restructuring specialist who had previously overseen the liquidation of Enron, described FTX as the biggest mess he had encountered in his 40 years of legal and restructuring experience, citing a complete failure of corporate controls and an absence of trustworthy financial information.
In a statement on Wednesday, Ray expressed his satisfaction with the proposed reorganization plan, stating, "We are pleased to be in a position to propose a chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors."
The proposed plan, if approved by the court, would mark a significant milestone in the resolution of one of the most high-profile cryptocurrency exchange collapses in recent years. It also underscores the importance of robust corporate governance and financial transparency in the rapidly evolving world of digital assets.
