Author: Steven Church, Bloomberg; Translated by: Wuzhu, Golden Finance
Cryptocurrency exchange FTX has amassed billions of dollars more than it needs to cover the losses suffered by its customers in the FTX collapse in November 2022, allowing them to receive full compensation after the company goes bankrupt.
The extra funds will be used to pay interest to the company’s more than 2 million customers, a rare outcome as creditors typically receive very little money in U.S. bankruptcies.
“This is an incredible outcome for any bankruptcy case,” said FTX CEO John Ray, who took over the company after it went bankrupt.
The company will have as much as $16.3 billion in cash to distribute once all of its assets are sold, according to a company statement. It owes about $11 billion to customers and other non-government creditors.
While all debts will be paid in full, plus interest, shareholders will be left with nothing, according to court documents filed late Tuesday in the federal court in Wilmington, Delaware, which is handling the FTX case.
Depending on the type of claim in the case, some creditors could receive up to 142% of what they are owed. However, the vast majority of customers will likely receive 118% of what they received on the FTX platform on the date of the company’s Chapter 11 bankruptcy.
The company, which is now being run by restructuring advisers, has also proposed setting up a fund to pay some creditors, including those who loaned FTX cryptocurrencies, money that would otherwise go to government regulators.
As FTX moves into the final stages of its bankruptcy case, payments could still take several months.
Earlier this year, the company had about $6.4 billion in cash. The increase was largely due to a broad rally in the prices of various cryptocurrencies, including Solana, a cryptocurrency heavily backed by convicted fraudster and FTX founder Sam Bankman-Fried. The company also sold dozens of other assets, including various venture capital projects, such as a stake in artificial intelligence company Anthropic.
The latest data highlights FTX’s surprising handling — drawing comparisons between the firm’s collapse and the fraud-driven downfall of Enron Corp. and the unravelling of Bernie Madoff’s Ponzi scheme.
But restructuring advisers have since been tracking the company’s assets and untangling a web of accounts scattered around the world.Those recoveries have been given a big boost by the cryptocurrency rally, which has caused the price of bitcoin to roughly quadruple since the end of 2022.
In a filing Tuesday, restructuring advisers laid out new details of a proposal to distribute cash to creditors and wind up the Chapter 11 case. The document, known as a disclosure statement, is designed to help creditors vote on a proposed payment plan.
U.S. Bankruptcy Judge John Dorsey will consider the vote when he decides later this summer whether to approve the plan. Dorsey has scheduled a hearing on the disclosure statement and voting procedures for late June.
FTX filed for bankruptcy in November 2022 after Bankman-Fried shut down the company's cryptocurrency trading platform and handed over control to bankruptcy experts. He was later convicted of fraud.
