FTX Creditors to Receive 118% Payout in New Recovery Plan (2024)

by BSCN

May 8, 2024

FTX's latest court filingreveals that almost all creditors of the collapsed cryptocurrency exchange can expect to receive more than their initial claims.

According to the reorganization plan awaiting approval from the Delaware bankruptcy court, customers whose claims are $50,000 or less, i.e. 98% of the creditors will receive approximately 118% of their owed amounts. This payout scheme is far more generous than earlier predictions, which had pegged recovery at just 90%.

The proposed reorganization plan outlines that FTX owes creditors around $11.2 billion, with assets available for distribution between $14.5 billion and $16.3 billion.

Raising Funds Through Asset Sales

FTX's recovery efforts included liquidating various investments held by the exchange and Alameda, Bankman-Fried’s cryptocurrency hedge fund. The sale of most of FTX's stake in Anthropic alone brought in nearly $900 million.

However, FTX has struggled with significant cryptocurrency shortages, an issue that has hampered potential gains from market appreciation during the reorganization phase.

Settlements and Legal Resolutions

The new plan also aims to resolve numerous regulatory and governmental claims. Notable among these is an agreement with the IRS, settling a $24 billion claim for a substantially lower combined payment of $885 million.

The settlement strategy shows FTX's broad approach to addressing the financial chaos left by its founder Sam Bankman-Fried.

After Bankman-Fried'scriminal convictions and the subsequent collapse of FTX's operational structure, the exchange has begun restitution. John Jay Ray III, the new CEO, has been at the forefront of what he calls unprecedented failures in financial management and corporate governance.

The proposed payouts, if approved, could significantly mitigate the financial damage to FTX’s vast array of creditors.