In a major development for FTX, the now-defunct cryptocurrency exchange, a U.S. judge has approved a plan to liquidate the company and distribute funds to its users. On October 7, United States Bankruptcy Judge John Dorsey gave the green light for FTX’s liquidation strategy during a hearing in the Delaware bankruptcy court. This plan paves the way for FTX to start paying back its customers and creditors.
The approved plan includes paying back roughly 98% of the users based on the value of their accounts, with some receiving about 119% of what they had originally claimed. The bankruptcy case, which began in November 2022, has been a long and complex one, involving criminal charges and civil lawsuits against FTX’s key executives. FTX’s current CEO, John J. Ray III, expressed optimism about the decision, calling it a significant step in repaying those affected. He noted that non-government creditors are set to recover 100% of their claims, plus interest, in what could be one of the largest bankruptcy settlements in history.
Challenges and Criticisms of the Plan
While the court’s decision has been praised as progress, some critics have voiced concerns. One key issue is that the repayment plan does not account for the potential gains in cryptocurrency values from 2022 to 2024. Sunil Kavuri, an FTX creditor who attended the bankruptcy proceedings, pointed out in September that users might only get back between 10% and 25% of their crypto assets’ current value. This has left many users frustrated, especially given the significant rise in Bitcoin’s value during this period.
When FTX originally filed for bankruptcy in 2022, Bitcoin was trading around $16,000. Today, it’s valued at over $63,000. As a result, millions of users have been unable to access their funds for nearly two years, with some holding onto tokens that are now worth much more than when FTX collapsed.
Legal Consequences for FTX Executives
Meanwhile, several of FTX’s former executives have faced serious legal consequences for their roles in the exchange’s downfall. Sam Bankman-Fried, the former CEO of FTX, was sentenced to 25 years in prison after his 2023 trial. Additionally, Caroline Ellison, former CEO of Alameda Research, was sentenced to two years behind bars in September 2023.
The timeline for when users will actually receive their repayments remains unclear. Some false rumors had surfaced in September suggesting that FTX claims had already been settled, but this was not the case. Many are now waiting to see how the distribution of billions in funds will affect the broader cryptocurrency market, just as the repayment of Mt. Gox users did in July 2024.