Customers of bankrupt cryptocurrency exchange FTX will get all their money back, plus interest, The New York Times, The Wall Street Journal and other media reported.
Under a plan filed in federal bankruptcy court in Delaware, nearly all of FTX’s creditors, including hundreds of thousands of ordinary investors, would receive cash payments equivalent to 118 percent of the assets they had stored on FTX, according to lawyers, the Times reported. The FTX estate in bankruptcy said it expects to repay all nongovernmental creditors in full, the Journal reported.
The estate of FTX, which collapsed in November 2022, predicted that it will have between $14.5 billion and $16.3 billion in cash to distribute to customers and other creditors from the assets it has collected. Those payments would flow from a pool of assets that FTX’s lawyers have pulled together in the 17 months since the exchange collapsed, the lawyers told the Times.
The amount owed to customers was based on the value of their holdings at the time of FTX’s bankruptcy, so customers will not benefit from a recent surge in the crypto market. A bitcoin is now worth more than $60,000, but it was valued at less than $20,000 at the time of the collapse.
The plan requires approval by the federal judge overseeing FTX’s bankruptcy, but the timeline could be extended if creditors raise any objections.
“The timing of recovery is still a big question mark,” said Matthew Sedigh, the chief executive of Xclaim, a platform for creditors to trade bankruptcy claims, in an interview with the Times. “Even if the recovery amount is better than expected, collecting these amounts two years from now is kind of a slap in the face.”
Some of the recoveries stemmed from successful investments that founder and CEO Samuel Bankman-Fried made during his tenure, such as a $500 million investment in artificial intelligence company Anthropic in 2021. This year, about two-thirds of FTX’s stake in Anthropic sold for $884 million.
FTX also reached a deal to recoup more than $400 million from Modulo Capital, a hedge fund that Bankman-Fried had financed, and suits have been filed to recover funds from former company executives and others, including Bankman-Fried’s parents.
The speed of the recoveries in the FTX case is not only unusual for a bankruptcy, but it has also been highly profitable for the lawyers working on it. As of last fall, the law firm Sullivan & Cromwell and other experts overseeing the FTX case had charged more than $320 million in fees, the Times reported.
The amount that FTX recovered is “in general pretty unheard of. That’s something that is really quite astonishing for a major bankruptcy,” said Yesha Yadav, a law professor at Vanderbilt University, in an interview with the Times. He also said, “This is a huge bonanza for the crypto lawyers."