FTX recovers billions more than debt and will reimburse customers with interest

Cryptocurrency exchange FTX has accumulated billions of dollars more than necessary to cover what customers lost in the exchange’s collapse in November 2022. Users who left cryptocurrencies stranded on the exchange will therefore be expected to recover all of their lost amounts when The company went bankrupt.

The extra amount will be used to pay interest to the broker’s more than 2 million investors. Depending on the type of credit they hold, some creditors may be able to recover up to 142% of what is owed to them. The vast majority of customers, however, will likely receive 118% of what they received on the FTX platform on the day the company filed for bankruptcy, FTX said in a statement.

Surprising outcome

The numbers illustrate the surprising result of the bankruptcy process of a company that has been compared to the Enron case and Bernie Madoff’s scheme. The outcome is considered rare for cases like this. “In any bankruptcy, this is an unbelievable result,” said current FTX CEO John Ray, an executive specializing in restructuring who took over the company after it collapsed.

Once it finishes selling all of its assets, FTX will have up to $16.3 billion to distribute, according to a company statement. The business owes customers and other non-government creditors about $11 billion.

Payments are expected to occur over several months as FTX moves through the final stages of bankruptcy proceedings. The plan will still be assessed by the Court, which is expected to hold a new hearing on the proposal at the end of June. A final decision is expected later this year.

Cryptocurrency appreciation

Since taking over FTX, the new administrators have tracked the company’s assets and uncovered a network of accounts spread across the world. At the beginning of this year, the company had about $6.4 billion in cash.

The increase in amount is mainly due to a general appreciation in the prices of several cryptocurrencies, including Solana (SOL), a token heavily supported by, Sam Bankman-Fried, founder of FTX sentenced to 25 years in prison.

The company also sold dozens of other assets, including several invested through its investment arm. venture capitalsuch as a stake in artificial intelligence company Anthropic.

Shareholders are left with nothing

Although all debts will be paid in full and with interest, nothing will be left for the company’s shareholders, according to court documents presented on Tuesday night (7) in the federal court of Delaware, in the United States, where the case is being processed.

The exchange also proposed creating a fund to pay some creditors, including those who lent cryptocurrencies to FTX.

© 2024 Bloomberg L.P.