Bankrupt FTX Proposes to Return 90% of Customer Funds
FTX, the collapsed crypto exchange, has proposed a plan that could see over 90% of customers' assets returned, despite hurdles that might affect the final disbursement.
The troubled crypto exchange FTX, which filed for bankruptcy last November, has proposed a plan that could see over 90% of customers’ assets returned. The plan, which is being supervised by a debtors’ group, is set to be formally filed by December 16, 2023, to a U.S. Bankruptcy Court for review.
FTX’s financial turmoil came to light after CoinDesk shed light on the state of its balance sheet, leading to the company’s downfall. Replacing the original founder Sam Bankman-Fried, who is currently on trial for criminal charges, the new CEO John J. Ray III has criticized financial controls at FTX.
The proposal suggests the division of missing customer assets into three categories based on the situation at the start of the Chapter 11 cases. These categories include assets for FTX.com customers, assets for FTX.US customers, and a “General Pool” consisting of other assets.
According to the proposal, customers with a settlement amount of less than $250,000 can accept the settlement without any reduction in claim or payment. This settlement is 15% of customer withdrawals on the exchange, calculated from nine days before the exchange collapsed.
Despite the promise of substantial repayments, potential obstacles such as taxes, changes in token prices, and government claims may hinder full recoveries. Additionally, any party – insiders, affiliates, or customers – who were aware of the inappropriate use of customer deposits and corporate funds, or those who altered their KYC information to facilitate withdrawals when they were suspended, could be excluded from the settlement.
The “Shortfall Claim” proposed in the plan corresponds to the estimated worth of missing assets at the exchange. This shortfall is estimated to be nearly $9 billion for FTX.com customers and $166 million for FTX.US customers. However, it is likely that not all customers will be paid in full, and the percentage of losses may be higher for FTX.com users.
If the plan gains court approval, FTX anticipates disbursing funds by the end of the second quarter in 2024. CEO John J. Ray III expressed satisfaction with the settlement, stating that the creditors and debtors have managed to create an enormous value from a situation that could have resulted in near-total loss for customers.
