Almost all FTX creditors will recover 118% of their funds in cash, Estate says in new plan

Bankrupt cryptocurrency exchange FTX has proposed a new reorganization plan that would see a whopping 98% of its creditors recover 118% of their claims – in cash – within 60 days of court approval, according to new documents filed on Tuesday night.

Under the plan, other non-government creditors would recover 100% of their claims plus up to 9% interest to compensate them “for the time value of their investments.” The deal is still subject to approval by the Delaware bankruptcy court overseeing the bankruptcy case.

The proposed payments are higher than previous estimates from the estate of FTX, which said in October it expected to return only 90% of client funds. In January, FTX’s current CEO, John Jay Ray III, revised that estimate and told the court that he expected to be able to pay customers in full.

Although the cryptocurrency market has recovered since the collapse of FTX and its subsequent bankruptcy, irritating many of FTX’s clients, who have missed the opportunity to profit from the rise in cryptocurrency prices while their funds are trapped in the bankruptcy limbo, the estate denies that the market recovery is the driving force behind its massive cash pile.

In a Tuesday news release, FTX’s estate said it expects to have between $14.5 and $16.3 billion in cash available for distribution when a Delaware bankruptcy court approves a plan, the result of a year and a half of scraping. gather assets scattered around the world and liquidate them.

“As previously revealed, FTX.com had a huge deficit at the time of its Chapter 11 filing in November 2022: it owned just 0.1% of Bitcon and only 1.2% of Ethereum customers believed it had it,” the press release said. “Consequently, debtors have not been able to benefit from the appreciation of these missing tokens during these Chapter 11 cases.”

Other sources of value, including investments made by FTX and Alameda Research – such as their 8% stake in AI startup Anthropic, which was sold piecemeal to institutional investors for $884 million in March – have been liquidated to generate cash to pay claims.

FTX’s new reorganization plan would also resolve a number of claims from regulators and government agencies, including the Internal Revenue Service (IRS) and the US Commodity Futures Trading Commission (CFTC).

The IRS agreed to settle its claims for $24 billion in exchange for a cash payment of $200 million and a subordinate claim of $685 million that will only be paid after all creditors and other government entities.

The CFTC and other anonymous government plaintiffs agreed to subordinate their claims as long as FTX users and investors were paid interest in full. There are also plans to create a special fund to make “supplemental restitution” to certain clients and creditors, although the details of this agreement have not been finalized, according to the press release.

A hearing to discuss the proposed plan is scheduled for June.

Former FTX CEO and convicted fraudster Sam Bankman-Fried previously attempted to use the estate’s ability to refund clients in full as proof that the collapse of his exchange had no harm to its clients.

Before her sentencing in March, Bankman-Fried’s attorneys argued that their client should receive a light sentence, in part because the clients would get all their money back.

Ray, along with dozens of FTX creditors, wrote to the court arguing that the estate’s ability to scrape together enough to pay money to its victims is the result of “tens of thousands of hours… spent digging through the rubble.” from Mr. Bankman-Fried’s house.” an expanding criminal enterprise to unearth every possible dollar, token or other asset” – does not mean that his conduct was not criminal.