Less than two years after FTX’s collapse, its new owners are trumpeting a proposal to repay customers with interest.
Under the proposed plan — which still has to be approved by a federal bankruptcy court — customers will get back between $14.5 billion and $16.3 billion.
By its own estimates, FTX owed its customers and creditors about $11.2 billion on November 11, 2022 — the day it filed for bankruptcy.
The reorganisation plan is 90 pages long. A separate document explaining the plan is another 163 pages.
DL News dug up some of the wildest details buried in those pages.
Shareholders claimed they lost $27 quintillion in the collapse of FTX
Spare a thought for the new leadership of FTX, which had to sift through over $27.3 quintillion worth of “purported stakeholder claims.”
Those claims “included many duplicative and inflated claims, as well as claims whose valuation would be hotly contested,” the plan said, adding that efforts were further complicated by the FTX Group’s “shoddy books and records, especially as they relate to the FTX.com exchange.”
John J. Ray, who was appointed CEO of FTX to shepherd the company through bankruptcy, famously told Congress that the company had an “unprecedented lack of documentation,” and used software intended for small businesses to track its accounting.
After objecting to what the plan calls these “frivolous, duplicative and superseded” claims, FTX was left with $40 billion in customer claims and $332 billion in general unsecured claims.
Ultimately, it expects the “allowed claims” — in other words, what it actually owes its victims — to total $11.2 billion. But it’s still sifting through “hundreds of thousands of unreconciled filed proofs of claims,” a process it expects to be ongoing even if customer repayment begins later this year.
US users made up a fraction of FTX’s customers — and an even smaller fraction of its deposits
Only 21% of customers were based in the US, according to FTX’s estimates, and held few assets on the exchange compared to international investors.
FTX estimates it owes international customers $7.9 billion, according to the restructuring plan. Meanwhile, it owes US customers just $168 million — about 2% of the total.
Customers will get their money back — but only if the taxman gives up his (massive) cut
FTX has proposed making customers whole and paying them 9% interest.
If this “remarkably favourable outcome” comes to pass, it will be because government agencies have agreed to suspend their own massive claims against FTX so that victims can be paid out a bit more than the value of their losses.
Many FTX creditors are furious about the proposed plan, largely because they won’t be repaid in Bitcoin or Ether, but in cash — specifically, the dollar value of their deposits on the day FTX filed for bankruptcy, a nadir for crypto prices.
The plan acknowledges that repaying its customers the November 11, 2022 value of their deposits isn’t enough, which is why it’s negotiating with government agencies to subordinate their claims.
According to FTX, the largest of these governmental claims — $8.7 billion — was made by the markets regulator the Commodity Futures Trading Commission, stemming from a fraud complaint against FTX.
The US tax authority also claims FTX owes it some $24 billion in taxes, a figure FTX calls “significantly overstated.” The company has instead proposed paying the IRS $200 million straightaway, with another $685 million to be paid after customers and the CFTC get their cut, though there likely wouldn’t be any money left at that point, according to FTX’s own assumptions.
There’s no guarantee the government will play along — neither agency has yet agreed to the plan.
Aleks Gilbert is a DeFi reporter at DL News. Reach out to him at aleks@dlnews.com.
