Bankruptcy lawyers representing clients affected by the 17-month-old cryptocurrency exchange FTX meltdown believe most will receive their money back plus interest
The information was released approximately eight months after former CEO and co-founder of FTX Sam Bankman-Fried (SBF) was convicted on seven counts pertaining to money laundering, fraud, and conspiracy.
During that time, approximately $8 billion in customer funds went missing. In March, SBF was sentenced to 25 years in prison and ordered to forfeit $11 billion. The cryptocurrency magnate lodged an appeal last month, which may last for years.
The process of restructuring
Following its bankruptcy filing in late 2022, SBF ceased operations and appointed U.S. attorney John J. Ray III as CEO and “chief restructuring officer,” with the responsibility of supervising the reorganization of FTX.
Shortly after assuming leadership, Ray stated in testimony that he did not “trust a single piece of paper in this organization,” notwithstanding some of the audits that had been conducted previously at FTX.
Ray and his team spent the subsequent months attempting to recover the missing funds, allocating approximately $8 billion in venture capital investments, political contributions, and real estate—including a $500 million bet in artificial intelligence (AI) firm Anthropic prior to the generative AI boom—which the FTX estate sold for $884 million earlier this year.
At first, it appeared improbable that investors would recover a significant portion, if any, of their capital. However, indications in recent months have suggested that positive developments may be forthcoming, as FTX has made strides in recovering cash through a variety of investments and from company executives.
98% of FTX creditors will receive 118% of the value of their FTX-stored assets in cash, while the remaining creditors will receive 100% plus “billions in compensation for the time value of their investments,” the FTX estate announced in a press release today.
FTX anticipates disbursing a cumulative sum of $14.5 to $16.3 billion in cash. This amount comprises assets presently under the jurisdiction of the United States Department of Justice, chapter 11 debtors, liquidators, the Securities Commission of The Bahamas, and other relevant entities.
Although the relevant bankruptcy court must approve the reorganization plan, the company asserts that its goal is to resolve all pending disputes with the government and stakeholders “without costly and protracted litigation.”Notably, creditors will not profit from the Bitcoin surge that has ensued in the cryptocurrency industry since FTX failed.
FTX filed for bankruptcy with a substantial shortfall in Bitcoin and Ethereum, which was significantly less than what its clients believed it to be worth.
Consequently, the value appreciation of these tokens will not be reflected in this settlement.
