FTX will be allowed to refund billions to customers after approval of bankruptcy plan
FTX on Monday received court approval for its bankruptcy plan, which will allow it to fully repay customers with up to $16.5 billion (about Rs. 1,38,550 crore) in assets recovered since the once leading crypto exchange collapsed.
U.S. Bankruptcy Judge John Dorsey approved the wind-down plan at a court hearing in Wilmington, Delaware, saying FTX’s success made it “a model case for how to handle a very complex Chapter 11 bankruptcy proceeding.”
The plan is based on a series of settlements with FTX customers and creditors, US government agencies and trustees appointed to wind down FTX’s operations outside the US.
The settlements allow FTX to use its assets to first reimburse customers of its crypto exchange, before potentially paying competing claims filed by government regulators. FTX plans to refund 98 percent of its customers — those who had $50,000 (approximately Rs. 41.9 lakh) or less in the exchange — within 60 days of the plan’s effective date, which has not yet been established.
Once ranked among the top crypto exchanges in the world, FTX collapsed after news surfaced that founder Sam Bankman-Fried was taking money from customers to pay off risky bets made by his hedge fund, Alameda Research. Bankman-Fried was sentenced to 25 years in prison in March for stealing from FTX customers, and he has appealed his conviction.
FTX continues to engage with the US Department of Justice over $1 billion (approximately Rs. 8,396 crore) seized by the government during Bankman-Fried’s criminal prosecution. FTX shareholders, who would normally receive nothing in a bankruptcy proceeding, could receive up to $230 million (about Rs. 1,931 crore) from the funds seized by the DOJ, according to court documents.
FTX has estimated that it will have between $14.7 billion (approximately Rs. 1,23,430 crore) and $16.5 billion (approximately Rs. 1,38,538 crore) available to repay creditors, enough to give customers at least 118 percent of the value on their accounts. as of November 2022, the date the company filed for bankruptcy.
U.S. government agencies, including the Commodity Futures Trading Comission and the Internal Revenue Service, agreed to give FTX priority to refund customers over fines and tax liabilities. bankruptcy in the US
FTX said the result was a victory for creditors, made possible by the ability to recover cash and crypto assets that disappeared during the company’s chaotic collapse. The company also raised additional money by selling other assets, including its investments in technology companies such as artificial intelligence startup Anthropic.
“Today’s achievement is only possible thanks to the experience and tireless work of the team of professionals supporting this case, who have recovered billions of dollars by rebuilding FTX’s books from the ground up and from there assets from across bringing the whole world together,” says FTX CEO John. Ray said this in a statement on Monday.
Customers had mixed reactions to the plan, with many expressing disappointment that FTX’s demise caused them to miss out on a strong recovery in crypto prices since the market bottomed in 2022. Some customers had objected to the plan, demanding higher refunds due to recent developments. increases in the value of cryptocurrency.
David Adler, a lawyer representing four aggrieved creditors, said the price of a bitcoin, for example, has risen to over $63,000 (about Rs. 52.8 lakh) from its price of $16,000 in November 2022 (about Rs. 13, 4 lakh). Customers who deposited bitcoin on the FTX exchange are finding it difficult to accept FTX’s claim that they are getting a 100% recovery based on the lower prices of two years ago, Adler said.
FTX said it was not possible to simply return the crypto assets that customers had deposited because the customers’ assets were gone, embezzled by Bankman-Fried.
At the time of the bankruptcy filing, FTX.com held just 0.1 percent of the Bitcoin its customers believed they had deposited on the exchange, according to the company. One of FTX’s financial advisors, Steve Coverick, testified Monday that it would be “exorbitantly expensive” to buy billions of crypto assets on the open market to pay back customers with the same types of cryptocurrency they had before the bankruptcy.
© Thomson Reuters 2024
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
