FTX, the cryptocurrency exchange that filed for bankruptcy protection in November 2022, has announced that nearly all of its customers will be reimbursed, along with interest, following its collapse. In a court filing with the U.S. Bankruptcy Court for the District of Delaware, FTX stated that a total of $14.5 billion to $16.3 billion would be available for distribution. The proposed reimbursement plan aims to provide 118% of the claim to customers and creditors owed $50,000 or less, covering approximately 98% of FTX customers.
While the reimbursement plan offers customers the cash value of their cryptocurrency assets at the time of FTX’s collapse, along with some interest, it falls short of the current value of these assets due to the resurgence of the crypto market. For instance, the price of bitcoin today is approximately three times higher than it was in November 2022.
FTX, co-founded in 2019 by Sam Bankman-Fried, once considered a prominent figure in the crypto industry, experienced a dramatic failure when concerned users began withdrawing their funds en masse in 2022, leading to a catastrophic chain of events across global crypto exchanges. At the time of its Chapter 11 filing, FTX held only 0.1% of the bitcoin and 1.2% of the ethereum that customers believed it possessed.
Sam Bankman-Fried, the former CEO of FTX, faced legal consequences for his actions. He was arrested in the Bahamas in December 2022 and extradited to the United States, where he was charged with fraud. In a federal court trial in Manhattan, Bankman-Fried was convicted of defrauding customers and investors out of at least $10 billion. Prosecutors revealed that he had misappropriated funds for personal gain, including luxury properties, alleged bribes, and private planes. In March, Bankman-Fried was sentenced to 25 years in prison, marking a stunning downfall for the once highly regarded industry figure.
The reimbursement funds, totaling billions of dollars, will come from various sources, including assets under the control of the debtors, the U.S. Department of Justice, authorities in Australia and the Bahamas, as well as private parties. FTX stated that the recovery level was achieved by monetizing a diverse collection of assets, primarily proprietary investments held by Alameda or FTX Ventures businesses, and litigation claims. The plan is subject to finalization in U.S. Bankruptcy Court.
