Bankruptcy lawyers representing clients affected by the dramatic crash of cryptocurrency exchange FTX 17 months ago say the vast majority of victims will get their money back — plus interest.
The news comes six months after the co-founder and former CEO of FTX Sam Bankman-Fried (SBF) was found guilty of seven counts related to fraud, conspiracy and money laundering, with approximately $8 billion of client funds disappearing. SBF was sentenced to 25 years in prison in March and ordered to pay $11 billion in forfeiture. The crypto tycoon filed an appeal last month that could last years.
Transformation
After filing for bankruptcy in late 2022, SBF resigned and the US attorney John J. Ray III was introduced as CEO and chief restructuring officer, tasked with overseeing the reorganization of FTX. Shortly after taking office, Wray said in a deposition that despite some of the checks that had previously been done on FTX, he did not “trust a single piece of paper to this organization.” In the months that followed, Ray and his team began tracking down the missing funds, with about $8 billion in real estate, political donations and VC investments — including a $500 million investment in the artificial intelligence company Anthropic before its genetic boom artificial intelligence. FTX estate managed to sell earlier this year for $884 million.
Initially, it seemed unlikely that investors would get much, if any, of their money back, but signs in recent months suggested that there may be good news on the horizon, with progress being made in recovering cash through various investments that FTX had made , as well as from executives dealing with the company.
We now know that 98% of FTX creditors will receive 118% of the value of their FTX-stored assets in cash, while other creditors will receive 100% — plus “billions in compensation for the time value of their investments,” in a press release released today by the FTX estate.
In total, FTX says it will be able to distribute between $14.5 billion and $16.3 billion in cash, which includes assets under the control of entities including Chapter 11 debtors, liquidators, the Bahamas Securities and Exchange Commission, the United States Department of Justice, among various other parties.
While the reorganization plan will need approval from the relevant bankruptcy court, the intention, they say, is to resolve all current disputes with stakeholders and the government, “without costly and protracted litigation.”
It is worth noting here that creditors will not benefit from the Bitcoin boom that has emerged from the crypto industry since FTX took off. At the time of its bankruptcy, FTX had a huge deficit in Bitcoin and Ethereum – much less than customers thought it actually had.
Therefore, the appreciation of the value of these tokens will not take place as part of this settlement.
