As a dramatic testament to its resilience, the once beleaguered cryptocurrency exchange, FTX, has announced a plan that ensures nearly all of its customers will receive the funds they were owed post its implosion two years ago. The plan, filed in a court late on a Tuesday, revealed that FTX is on track to swoop in like a proverbial night in shining armor, liquidating its total financial obligations of a staggering $11.2 billion to its creditors.
FTX painted a promising financial picture for its creditors, estimating that it can earmark a sum between $14.5 billion and $16.3 billion to meet their claims. According to the court filing, the exchange not only fulfills these claims to the fullest extent but also allows for supplemental interest payments to creditors, provided there are remaining funds. It continues to address the knock-on effect of its collapse, promising a 9% interest rate to the majority of its creditors.
The nostalgia of such recoveries might be bittersweet for traders who once dabbled in the high-stake world of cryptocurrency on the exchange, scrambling for cover at its downfall. When FTX sought bankruptcy protection in November 2022, a single bitcoin carried a value of $16,080. Fast forward to two years, as the economy revives and the crypto prices surge while the FTX assets are in unravelling mode, bitcoin prices teased the curve at a whopping $62,675, a windfall loss of 290% for those who missed out on the golden opportunity of holding onto these coins.
Yet, FTX has charted an action plan for the smaller players too. Customers and creditors having claims up to $50,000 are projected to reap approximately 118% of their respective claim, thereby encompassing nearly 98% of FTX’s client base.
To fulfill these ambitious claims, FTX leveraged a spectrum of assets predominantly constituted by proprietary investments held by Alameda or FTX Ventures businesses and litigation claim settlements.
It is worth recalling that FTX was no small player in its heydey. It held the third rank among global cryptocurrency exchanges when it reluctantly sought bankruptcy protection in November 2022, triggered by the crypto equivalent of a bank run.
When the dust of the collapse had settled, CEO and founder Sam Bankman-Fried recused from his position, succumbing to the weight of the vast fraudulent activities that rocked FTX. His resignation signaled an end of an era, disrupted abruptly from the glory days where FTX was synonymous to Super Bowl advertisements, congressional testimonies, and celebrity endorsements.
Despite the murky past, FTX foresees new beginnings. With the resignation of the previous CEO, John Ray III, known for his expertise in bankruptcy litigations and his deft handling of the Enron aftermath, stepped up to the challenge.
Ray in a statement, expressed his gratification of proposing a chapter 11 plan envisioning the return of 100% bankruptcy claim amounts plus stipulated interest for non-governmental creditors. He also hinted towards reviving FTX.com, even though the future hangs uncertain for the ailing exchange, beleaguered by residual impact of a former company leadership gone awry.
Just before its collapse, FTX was on Binance’s radar for possible acquisition. Still holding the fort as the world’s largest crypto exchange, Binance navigated its share of legal quagmires when its founder and former CEO, Changpeng Zhao, faced punitive measures for enabling illegal money transfers connected to child sex abuse, drug trafficking, and terrorism.
As these transgressions and high-profile court hearings cast long shadows on the crypto industry, FTX prepares to face a hearing on the dispersion of its assets on June 25. The overall narrative leaves the industry and its observers at a cliffhanger, waiting to see if FTX will indeed rise like a phoenix from the ashes of its past, or flounder further into the morass.
