The insolvent digital currency platform FTX, has proposed a reorganisation plan to the court that could result in most of its account holders getting reimbursed fully and perhaps more for their confirmed claims. FTX confirmed it had amassed around £11 billion (€14 billion), mostly attained through sale of venture capital investments made by the platform and its affiliated trader Alameda Research. This amount is sufficient to compensate 118 pennies for every pound to the 98% creditors who possess £37,500 or less in claims.
All remaining claimants will be awarded at minimum 100 pennies on every pound. The meltdown of FTX in November 2022, which led to huge losses in customer accounts, profoundly shook the digital currency market and culminated in the sentencing of its founder, Sam Bankman-Fried, to 25 years in federal prison on charges of deceit.
John Ray III, who assumed control of the platform post its insolvency filing, announced on Tuesday, “We are glad to be capable of proposing a Chapter 11 plan that imagines paying back 100 percent of insolvency claim amounts plus interest for non-government creditors”.
John further characterised the FTX business he inherited as a chaotic mess and crime scene, in light of accusations that Bankman-Fried was extravagantly using the customers’ accounts for his personal expenditure and trading; a strategy that fell apart as the value of digital assets plummeted during the 2022’s ‘crypto frost’.
FTX outlined that the recent hefty surge in crypto values didn’t result in the predicted large recoveries for their account owners. The platform revealed that around 99% of bitcoin and other virtual currencies that were believed to be in the exchange at the time of bankruptcy filing were absent, leaving the recovery pool majorly filled by the revenues obtained from the company’s investment portfolio.
One of FTX’s most lucrative assets was its interest in the AI start-up Anthropic, the shares of which it sold for nearly $900 million this year. Expectedly, cash realized from the sale of assets will fall between £10.8 billion and £11.8 billion.
FTX’s reorganisation plan has managed to win the backing of major creditor groups and includes a $200 million cash settlement of a $24 billion claim made by the US tax collecting body, the Internal Revenue Service.
The endorsement of the revised proposition by the bankruptcy court will be followed by a poll on its terms by the claimants, before a conclusive hearing to formally ratify it takes place by the court. The refunded amounts will depend on the valuation of cryptocurrencies at the time the bankruptcy was filed. Prior to November 2022, Bitcoin, the most frequently exchanged cryptocurrency, had seen a drop of over 50 per cent in its value in the preceding half-year. This information is copyright of The Financial Times.