FTX’s Bankruptcy Plan Approved Despite User Dissent

FTX, the defunct cryptocurrency exchange, is entering the final stages of winding down after its controversial plan to repay creditors was approved by a U.S. bankruptcy court.
On Oct. 7, U.S. Bankruptcy Judge John Dorsey approved FTX’s reorganization plan, allowing the exchange to begin repaying customers.
According to the plan, FTX recovered between $14.7 billion and $16.5 billion worth of assets. The funds are earmarked for distribution to 98% of the exchange’s customers, with creditors set to receive the equivalent of 119% of their fiat balance at the time of FTX’s bankruptcy filing on Nov. 11, 2022.
“We are poised to return 100% 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,” said John Ray III, FTX’s CEO. “We’ve recovered billions by meticulously rebuilding FTX’s financial records and marshaling assets from around the globe.”
FTX said it will prioritize repaying customers who held balances of $50,000 or less, within 60 days of the plan's effective date. Users whose assets exceeded $50,000 or who have complex claims receive repayment over a longer timeline.
FTX abruptly collapsed in November 2022 following revelations that Sam Bankman-Fried, the exchange’s founder and CEO, misappropriated billions in customer funds to cover risky bets made by Alameda Research, FTX’s sister trading firm. Bankman-Fried was arrested by Bahamian authorities and extradited to the United States in December 2022, before being sentenced to 25 years behind bars for fraud in March.
Creditor pushback
However, many FTX creditors have expressed dissatisfaction with the reorganization plan, with most crypto assets posting triple-digit gains since FTX’s failure.
In November 2022, Bitcoin was trading at around $16,000, Ethereum was changing hands for $1,100, and Solana had slumped below $18. At the time of writing, Bitcoin is priced at $63,000, Ethereum is trading for $2,430, and Solana is worth $143.4.
As such, FTX customers argue they are being short-changed by a repayment schedule based on digital asset prices from November 2022.
"FTX customers feel scammed, robbed again, grappling with severe mental health issues, including anxiety, panic attacks, and the breakdown of families, as their life savings remain out of reach,” Sunil Kavuri, an FTX creditor turned activist, told The Defiant.
However, Steve Coveric, a financial adviser to FTX, told the court that repurchasing billions of dollars worth of cryptocurrencies from the open market to repay customers in-kind would be “exorbitantly expensive” on Monday.
Moving forward
While the court has approved the reorganization plan, the company remains in negotiations with U.S. government agencies over the fate of $1 billion worth of assets seized during the criminal prosecution of Sam Bankman-Fried. The assets could further boost recovery efforts, though its release is still under discussion.
FTX shareholders of FTX will also receive up to $230 million from assets seized by the U.S. Department of Justice. However, FTX creditors argue that equity holders should not receive any compensation until customers have been fully repaid.
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