FTX, the defunct crypto exchange that collapsed in November 2022, has proposed a new reorganization plan that aims to repay nearly all account holders in full for their claims. The unexpected windfall is made possible by the recovery of billions more dollars than initially anticipated. FTX revealed that it amassed approximately $15 billion from selling venture capital investments, primarily from the exchange and its affiliate Alameda Research. This amount is enough to fully repay nearly all creditors with claims of $50,000 or less, representing 98% of creditors. The remaining creditors will also receive a significant recovery, with a minimum payout of 118% of their claims. The proposed reorganization plan also includes potential additional compensation for the time value of money lost since FTX’s bankruptcy.
The reorganization plan by FTX goes beyond simply repaying creditors. It includes potential additional compensation for lost time value of money. This means that customers may not only get their money back, but also receive interest on it. This payout to over 2 million customers is a rare occurrence in typical US bankruptcy cases, where creditors often receive only a fraction of what they’re owed. The payout plan is significantly better than initial expectations, with some creditors potentially seeing a return of up to 142%. FTX is expected to have a significant surplus of cash after selling all its assets, which is more than enough to cover what it owes to customers and other non-government lenders.
FTX had been aggressively selling off its assets to raise the necessary funds to repay creditors. This includes investments made by both FTX and its affiliate, such as an 8% stake in AI startup Anthropic, which was sold to institutional investors for $884 million in March. The proposed distribution plan is contingent upon formal approval from the Delaware bankruptcy court. Even if approved, a disbursement of funds to creditors and account holders is likely a few months away, as FTX navigates the concluding stages of its bankruptcy proceedings.
Overall, FTX’s reorganization plan represents a significant step towards justice for the victims of the exchange’s collapse. The plan not only aims to fully repay creditors but also includes potential additional compensation for lost time value of money. This payout is a rare occurrence in US bankruptcy cases, where creditors often receive only a fraction of what they’re owed. FTX’s aggressive asset selling strategy has helped raise the necessary funds to repay creditors, with a surplus of cash expected after all assets are sold. The proposed distribution plan awaits formal approval from the bankruptcy court, with a disbursement of funds to creditors and account holders likely a few months away.
