Bankrupt FTX Plans to Pay Nearly All Customers 118% of Their Claims

Bankrupt cryptocurrency exchange FTX plans to repay 98 percent of its creditors up to 118 percent of their claims in cash, an announcement yesterday (Tuesday) detailed. Only creditors with $50,000 or less in claims will be eligible to receive the claims under this plan, which is expected to be fulfilled within 60 days of court approval.

Under the plan, all non-governmental creditors will also receive their claims in full, along with a 9 percent interest to be calculated from the date of the bankruptcy filing. According to the exchange, it will fulfill “the time value of their investments.”

Joy for FTX Creditors

“We are pleased to be in a position to propose a Chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors,” John Ray III, CEO and Chief Restructuring Officer of FTX, said in a statement.

The distribution plan came 17 months after the crypto exchange filed for bankruptcy. At the time of the bankruptcy filing, Bitcoin was trading at about $16,000, but it recently peaked at above $72,000. FTX was holding a significant stash of cryptocurrencies.

“As previously disclosed, FTX.com had a massive shortfall at the time of the Chapter 11 filing in November 2022 — holding only 0.1% of the Bitcoin and only 1.2% of the Ethereum customers believed it held,” the exchange noted. “The Debtors have not been able to benefit from the appreciation of these missing tokens during the Chapter 11 cases.”

Don’t know what Netflix paid for this Tom Brady Roast, but him getting roasted on FTX — with a side jab at Gronk — was worth it pic.twitter.com/Y0N0lorfgQ

— Trung Phan (@TrungTPhan) May 6, 2024

The bankruptcy exchange further highlighted that, according to its forecasts, it will have between $14.5 and $16.3 billion available for distribution.

“FTX has achieved this recovery level by monetizing an extraordinarily diverse collection of assets, most of which were proprietary investments held by the Alameda or FTX Ventures businesses, or litigation claims,” the announcement added.

The Compromise of Government Agencies

The condition of FTX looked grim when the company filed for bankruptcy. However, a proposed payout earlier estimated that the creditors would receive about 90 percent of their claims. Those figures were revised by the CEO Ray last January, revealing the plans to repay the customers in full.

The exchange was pushed to file for bankruptcy in November 2022 as it had an $8 billion hole in its books.

The latest reorganization would also see the settlement of claims with regulators and government agencies. The Internal Revenue Service (IRS), which has a claim of $24 billion, would receive $200 million in cash payment and a $685 million subordinated claim, which it will receive after the payout to all creditors and other governmental entities.

The Commodity Futures Trading Commission (CFTC) and other governmental claimants also agreed to subordinate their claims until the claim is paid to the FTX customers and other creditors.