In the latest developments of the bankruptcy case involving defunct cryptocurrency exchange FTX, the court has greenlit a liquidation plan. This decision is crucial as it paves the way for the exchange’s debtors to reimburse almost 100% of the users, a stark contrast from the troubled situation two years ago that resulted in lawsuits and criminal charges against its executives.
US Bankruptcy Judge John Dorsey gave a nod to the winding down of FTX’s operations as part of repaying the users. The repayment plan is a little over par, promising 119% of the claimed account value to be paid back to 98% of the platform’s users. This comes two years after FTX went bankrupt in November 2022, which led to multiple criminal indictments and civil lawsuits.
FTX’s CEO and Chief Restructuring Officer, John J. Ray III, expressed optimism about the court’s decision, projecting a complete return of bankruptcy claim amounts plus interest for non-government creditors. He also anticipates the asset distribution to be one of the “largest and most complex” in bankruptcy estate history.
However, the silver-lined cloud of repayment has its critics. Some argue that the plan, while intending to reimburse for assets held in FTX portfolios, doesn’t account for the token gains between 2022 and 2024. Sunil Kavuri, an FTX creditor, insisted that users would regain only between 10 and 25% of their cryptocurrency’s value because of this.
Adding to the woes, some key executives at FTX are set to serve prison sentences for their part in the company’s collapse. The sentences range from two years for former Alameda Research CEO Caroline Ellison, to a hefty 25 years for former FTX CEO Sam Bankman-Fried.
While it is not yet clear when the reimbursement process will commence following Judge Dorsey’s ruling, the event is set to greatly impact the cryptocurrency market, mimicking the repercussions of Mt. Gox repayments from past years.