FTX customers set to get back billions as refund

Failed cryptocurrency exchange FTX has received court approval of its bankruptcy plan, which will allow the firm to repay customers up to $16.5bn (£12.6bn). It was previously estimated that FTC owes creditors around $11.2 billion.

Nearly two years after the crypto firm spiraled into bankruptcy, a Delaware federal court judge approved FTX’s reorganisation plan. The approved court settlement allows the company to pay its customers first, before paying claims filed by regulatory bodies.

The Delaware judge said it was a “model case for how to deal with a very complex Chapter 11 bankruptcy proceeding.”

John Ray, who took over as FTX CEO after the company’s bankruptcy filing in late 2022, said, “Looking ahead, we are poised to return 100 percent of bankruptcy claim amounts plus interest for non-governmental creditors through what will be the largest and most complex bankruptcy estate asset distribution in history.”

Ray’s history

Ray has also shepherded Enron through bankruptcy. He said that arrangements are in order to make distributions to creditors globally. Ray said this reflects the “strong collaboration” FTX has with agencies that share its goal of “mitigating the wrongdoings of the FTX insiders.”

According to the plan approved, the company will pay 98 percent of its creditors 119 percent of the amount that they had in their accounts at the time of bankruptcy. Customers will receive the money within 60 days of the bankruptcy plan’s effective date, which is yet to be announced.

The bankruptcy estate will release a new announcement regarding the date of the payout plan going into effect and expected start date of distributions.

The settlement reached has drawn a mixed reception from former customers. Some argue that the payment in cash do not match the profits they would have received for holding the asset had they not been stolen.

FTX’s downfall

Deemed one of the biggest financial fraud cases, FTX’s downfall was rapid after it was revealed that its founder, Sam-Bankman-Fried stole and funnelled $8 billion from customers into his research hedge fund Alameda.

He was convicted of seven criminal counts last November, including stealing billions from FTX’s customers. He was sentenced to 25 years in prison and has appealed his conviction.