Former cryptocurrency exchange FTX has secured court approval for its bankruptcy plan, potentially setting aside more than $16 billion to pay creditors.
“The United States Bankruptcy Court for the District of Delaware has confirmed FTX’s Plan of Reorganization, less than two years after its historic bankruptcy filing,” the company said in an Oct. 7 statement. “Under the terms of the Plan, 98 percent of the creditors of FTX by number will receive approximately 119 percent of the amount of their allowed claims.”
The payments will be made within 60 days of the reorganization plan becoming effective.
FTX expects the total value of property collected, converted to cash, and available for distribution to be in the range of $14.7 billion to 16.5 billion.
A later report from CNBC indicated that Alameda was trading billions of dollars from FTX accounts without client knowledge and that the firm leveraged FTT as collateral.
Following these revelations, Binance CEO Changpeng Zhao said he would liquidate $500 million worth of FTT holdings, which triggered a run on both the cryptocurrency and FTX. The company tried to raise funds to keep the business afloat but failed.
FTX eventually filed for bankruptcy in November 2022. Prior to the bankruptcy, the company’s balance sheet showed the firm had only $900 million in liquid assets to cover its $9 billion in liabilities.
The company suspended customer withdrawals, and its assets were frozen by Bahamas regulators.
According to John J. Ray III, CEO and chief restructuring officer of FTX, the court’s decision to approve the reorganization plan is a “significant milestone” as the company attempts to give back cash to its creditors and customers.
“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,” he stated.
“The estate is working to finalize arrangements to make distributions to creditors across more than 200 jurisdictions around the world.”
Rulings Against FTX
The Commodity Futures Trading Commission (CFTC) obtained a $12.7 billion judgment against FTX and Alameda Research, with a New York court ordering FTX to pay the amount as part of offering monetary relief to the company’s victims, according to an Aug. 8 statement from the CFTC.At the Delaware bankruptcy court, the agency also agreed to subordinate its claims to those made by “victims of the FTX fraud scheme.”
“FTX used age-old tactics to create an illusion that it was a safe and secure place to access crypto markets. But the basic regulatory tools, like governance, customer protections, and surveillance that exist to identify misconduct and ultimately prevent collapse, were simply not there,” said CFTC Chairman Rostin Behnam.
Ian McGinley, director of the enforcement division, said the multibillion-dollar recovery was “the largest such recovery in CFTC history.”
“He knew it was wrong,” said U.S. District Judge Lewis Kaplan, who handed down the sentence. “He knew it was criminal. He regrets that he made a very bad bet about the likelihood of getting caught. But he is not going to admit a thing, as is his right.”
