FTX Announces Plan to Repay Most Creditors in Full

FTX, the cryptocurrency exchange that faced bankruptcy two years ago, has unveiled plans to reimburse the majority of its creditors in full, along with interest in an attempt to escape bankruptcy.

According to court filings, FTX disclosed owing approximately $11.2 billion to its creditors, with an estimated distribution pool ranging between $14.5 billion and $16.3 billion.

The proposed plan outlines full payment for all claims, with additional interest payments slated for creditors if surplus funds remain. The interest rate stands at 9% for most creditors.

While this may provide some relief, it represents a stark contrast for investors who experienced losses when the exchange collapsed. During FTX's bankruptcy filing in November 2022, the value of bitcoin was $16,080. However, with the subsequent surge in cryptocurrency prices, a single bitcoin now commands close to $62,675, translating to a significant loss for former investors.

Under the repayment plan filed with the U.S. Bankruptcy Court for the District of Delaware, customers and creditors claiming $50,000 or less are set to receive approximately 118% of their claim, encompassing around 98% of FTX customers.

FTX attributed its ability to recover funds to monetising assets, primarily comprised of proprietary investments held by Alameda or FTX Ventures businesses, and litigation claims.

Once the third-largest cryptocurrency exchange globally, FTX faced bankruptcy after encountering a crisis reminiscent of a bank run. Former CEO and founder Sam Bankman-Fried resigned in the wake of the collapse. In March, he was sentenced to 25 years in prison for his involvement in the fraud at FTX.

Following Bankman-Fried's departure, John Ray III, a seasoned bankruptcy litigator known for his work post-Enron, assumed the role of CEO. Ray expressed optimism about the proposed plan, highlighting its aim to return 100% of bankruptcy claim amounts plus interest for non-governmental creditors.