FTX's court-approved bankruptcy plan will use up to $16.5 billion in assets to fully repay customers. Judge John Dorsey called the plan a model of a complex bankruptcy case based on settlements with customers, creditors and the government. FTX plans to repay 98% of customers within 60 days of taking effect, especially those who hold $50,000 or less. Although FTX was once a top exchange, it collapsed after its founder misappropriated customer funds. Customers have mixed reactions to the repayment plan, with some hoping for higher refunds to reflect the recent rise in cryptocurrency prices.

FTX received court approval on Monday for its bankruptcy plan, which will allow it to fully repay customers using up to $16.5 billion in assets recovered since the collapse of the once-leading cryptocurrency exchange.

U.S. Bankruptcy Judge John Dorsey approved the wind-down plan during a court hearing in Wilmington, Delaware, saying FTX’s success made it “a poster child example of how to handle a very complex Chapter 11 bankruptcy proceeding.”

The plan builds on a series of settlement agreements reached with FTX customers and creditors, U.S. government agencies, and the liquidator appointed to shut down FTX’s operations outside the United States.

The settlement allows FTX to use its assets to first repay customers of its cryptocurrency exchange before paying potential competition claims filed by government regulators. FTX plans to repay 98% of its customers (i.e., those who held $50,000 or less on the exchange) within 60 days of the plan’s effective date, but the plan has not yet been finalized.

FTX, once one of the world’s top cryptocurrency exchanges, collapsed after news broke that founder Sam Bankman-Fried took customer funds to pay off risky bets at 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 is still negotiating with the U.S. Department of Justice over $1 billion that the government seized during its criminal prosecution of Bankman-Fried. According to court documents, FTX shareholders generally do not receive any benefits in bankruptcy proceedings, but they can receive up to $230 million from funds seized by the Justice Department.

FTX estimates that by November 2022 (the date the company files for bankruptcy), it will have between $14.7 billion and $16.5 billion available to repay creditors, enough to pay customers at least 118% of their account value.

U.S. government agencies including the Commodity Futures Trading Commission and the Internal Revenue Service agreed to let FTX prioritize customer repayments over fines and taxes, and a Bahamian-appointed liquidator agreed to work with FTX in the U.S. after previously questioning the company’s authority to file for bankruptcy.

FTX said the outcome was a win for creditors because it was able to recover cash and cryptocurrency assets lost during the company’s messy collapse. The company is also raising additional funds by selling other assets, including investments in technology companies such as artificial intelligence startup Anthropic.

“Today’s achievement was only possible thanks to the experience and tireless work of the dedicated team supporting this case, who recovered billions of dollars by rebuilding FTX’s books from scratch and integrating assets from around the world from there,” FTX CEO John Lei said in a statement on Monday.

The plan has received mixed reactions from clients, with many expressing disappointment that FTX’s demise caused them to miss out on a strong rebound in cryptocurrency prices since the market bottomed in 2022. Some clients have objected to the plan, demanding higher repayment amounts to reflect the recent rise in cryptocurrency values.

David Adler, a lawyer representing four opposing creditors, said the price of Bitcoin, for example, has risen from $16,000 to more than $63,000 in November 2022. Adler said customers who deposited Bitcoin on the FTX exchange found it difficult to accept FTX's argument that they would receive a 100% refund based on the lower price two years ago.

FTX said it was not possible to simply refund customers’ deposited cryptocurrency assets because the customers’ assets were gone, having been misappropriated by Bankman-Fried.

At the time of the bankruptcy filing, FTX.com held only 0.1% of the bitcoin that its customers believed to have deposited with the exchange, according to the company. Steve Coverick, one of FTX’s financial advisers, testified on Monday that it would be “extremely expensive” to purchase billions of dollars in cryptocurrency assets on the open market in order to repay customers with the same type of cryptocurrency before bankruptcy.