Customers of bankrupt cryptocurrency exchange FTX are set to recoup all of the funds lost when the company collapsed in 2022, as well as interest payments of up to 9%, according to a announced company lawyers.
Under a plan proposed last Tuesday, creditors with claims of US$50,000 or less would receive about 118% of their investment within 60 days of the plan’s effective date. The company said it had recovered assets worth between US$14.5 billion and US$16.3 billion from assets held by the US Department of Justice, authorities in Australia and the Bahamas, as well as dozens of private parties.
“FTX achieved this level of recovery by monetizing an extraordinarily diverse set of assets, most of which were proprietary investments held by the Alameda Companies or FTX Ventures, or disputed claims,” said the announcement, co-signed by the firms. attorneys Sullivan & Cromwell, Quinn Emanuel Urquhart & Sullivan and Landis Rath & Cobb, who represent all of FTX’s debtors.
This recovery plan, which has yet to be finalized by a Delaware bankruptcy court, could bring a sense of closure to customers who lost money with FTX.
Yesha Yadav, a Vanderbilt law professor who specializes in cryptocurrency regulation, says it’s “extremely rare” for unsecured creditors in a corporate bankruptcy to see the types of recoveries promised to FTX customers.
Normal recoveries, especially for such complex insolvencies, may be only pennies on the dollar, and resolution can be a long and tedious affair.
Yesha Yadav, law professor at Vanderbilt
FTX was used as an exchange platform to buy and sell digital currencies, including bitcoin. It had accumulated billions before collapsing at the end of 2022 following a run on deposits. When it filed for bankruptcy in November of that year, it held just 0.1% of the bitcoin and 1.2% of the ethereum that customers thought it had, according to the announcement.
“Extraordinary harm” for customers
Sam Bankman-Fried, the company’s founder and chief executive officer, resigned and was convicted of widespread fraud for using client assets to finance corporate investments, political donations and expensive real estate. Billions were withdrawn from FTX and transferred to a hedge fund called Alameda Research, effectively under the control of Bankman-Fried, which used the money to make risky cross-border bets on cryptocurrencies, among other investments.
At the March hearing in which Bankman-Fried was sentenced to 25 years in prison, U.S. prosecutors cited the “extraordinary harm” to customers who entrusted their savings to the company and saw their value evaporate overnight. But Bankman-Fried said FTX still has the resources to compensate customers. “There are enough assets to do it,” he said, according to a report from the Washington Post from the courtroom. “There are billions more. It never stopped being true. »
When the company went bankrupt, it held a large investment portfolio. Some of them, like artificial intelligence firm Anthropic and cryptocurrency firm Ledger X, have performed well and contributed to the company’s holdings.
Bankruptcy lawyers said Tuesday that 100% of bankruptcy creditors will have their investments repaid. The 9% interest rate – which covers about 17 months that FTX remained in bankruptcy proceedings – applies to about 98% of creditors.
The value of these holdings is based on the values of the cryptocurrencies in November 2022, when the company filed for bankruptcy. This means that creditors will not benefit from the recent surge in cryptocurrencies, which has roughly tripled the price of bitcoin from where the legal proceedings began.
FTX customers, well aware of bitcoin’s rebound while their assets were stuck in bankruptcy proceedings, are unlikely to be satisfied with the promised payments, believes Yesha Yadav.
“Many feel aggrieved that their assets have been trapped in a process beyond their control, with their assets considered in many cases part of FTX’s heritage, and customers unable to benefit of the increase in the value of cryptocurrency prices,” she adds.
reference: www.lapresse.ca