FTX to repay 98% of customers within 60 days of effective date
Customers to receive at least 118% of account value as of Nov 2022
Mixed customer response due to missed crypto price rebound
NEW YORK, Oct 7 (Reuters) - FTX received court approval of its bankruptcy plan on Monday, which will allow it to fully repay customers using up to $16.5 billion 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 deal with a very complex Chapter 11 bankruptcy proceeding."
The plan is built on a series of settlements with FTX customers and creditors, U.S. government agencies, and liquidators appointed to wind down FTX's operations outside the U.S.
The settlements allow FTX to use its assets to repay customers of its crypto exchange first, before paying potentially competing claims filed by government regulators. FTX plans to repay 98% of its customers - those who held $50,000 or less on the exchange - within 60 days after the plan's effective date, which has not yet been determined.
Once among the world's top crypto exchanges, FTX collapsed after news surfaced that founder Sam Bankman-Fried took customer money to pay off risky bets made by his hedge fund, Alameda Research. Bankman-Fried was sentenced in March to 25 years in prison for stealing from FTX customers, and he has appealed his conviction.
FTX remains in talks with the U.S. Department of Justice over $1 billion that the government seized during the criminal prosecution of Bankman-Fried. FTX shareholders, who would normally receive nothing in a bankruptcy proceeding, could receive up to $230 million from the funds seized by the DOJ, according to court documents.
FTX has estimated that it will have between $14.7 billion and $16.5 billion available to repay creditors, enough to pay customers at least 118% of the value in their accounts as of November 2022, the date that the company filed for bankruptcy.
U.S. government agencies, including the Commodity Futures Trading Comission and Internal Revenue Service, agreed to let FTX prioritize customer repayment over fines and tax debts, and a liquidator appointed in the Bahamas agreed to work with FTX after previously challenging the company's authority to file for bankruptcy in the U.S.
