clients will get their money back (with interest)
Sam Bankman-Fried is in prison, but the cryptocurrency exchange he co-founded appears to be on the mend
When FTX collapsed in November 2022, many of its clients probably thought that they won’t get their money back. The cryptocurrency exchange went bankrupt after a brief but deadly crisis largely caused by the maneuvers of its founder Sam Bankman-Fried, who was sentenced to 25 years in prison.
A year and a half has passed since then, and people who once trusted the platform have seen a glimmer of hope. This week the company filed a Chapter 11 bankruptcy plan to reorganize its finances. And he promised to pay off his debts even with interest.
FTX’s plan to return lost money to its customers
We have encountered an announcement that is quite unusual. When a company goes bankrupt, the estimated time to pay its creditors begins Usually it’s five years. If everything goes as expected, former users of the exchange will be able to get their assets back much sooner, although they will still have to wait.
Submitting a plan is only the first step in reorganization. It must be carefully scrutinized by both the judge, in this case Judge John T. Dorsey, and the creditors. If approved, it would create a payment scheme that would prioritize customers and leave government tax debt in the background.
However, there are some points in the plan that may not appeal to everyone. The amount of money clients will receive will be calculated based on the value of their assets. during FTX bankruptcy (November 2022). This means they will not benefit from a bull run in the cryptocurrency market.
Despite the sector’s volatility, 2024 appears to be a good year for Bitcoin, which recently broke through the $69,000 barrier, although it is trading just above $60,000 at the time of writing. For example, FTX customers will receive payments worth $20,000 in Bitcoin.
In any case, victims will lose access to their assets for several years, so the “consensus indicator” 9% interest rate. It will be in effect from the time a company files for Chapter 11 until the payout, which we say is unclear when that will happen.
Where did the money come from?
One of the big questions now is how FTX was able to raise the money needed to present its turnaround plan. The company’s new management, led by John J. Ray, used several methods to raise funds, including venture capital investments, which Bankman-Fried launched.
The recovery maneuvers, scrutinized by authorities during the bankruptcy process, included the sale of a huge number of Solana tokens, a recovery agreement $400 million hedge fund Modulo Capital and selling shares of companies such as Robinhood and Anthropic.
Images | Engin Akyurt | FTH | Kanchanara
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