NEW YORK — FTX received court approval of its bankruptcy plan on Oct 7, which will allow it to fully repay customers using up to US$16.5 billion (S$21.5 billion) in assets recovered since the once-leading crypto exchange collapsed.
The plan is built on a series of settlements with customers and creditors, US government agencies and liquidators appointed to wind down FTX's operations outside America.
The settlements allow FTX to use its assets to repay customers of its crypto exchange first, before paying potentially competing claims filed by government regulators.
The company aims to repay 98 per cent of its customers — those who held US$50,000 or less on the exchange — within 60 days after the plan's effective date, which has not yet been determined.
FTX has estimated that it will have between US$14.7 billion and US$16.5 billion available to repay creditors, enough to pay customers at least 118 per cent of the value in their accounts as of November 2022, the date that the company filed for bankruptcy.
It remains in talks with the US Department of Justice (DOJ) over US$1 billion that the government seized during the criminal prosecution of FTX founder Sam Bankman-Fried.
FTX shareholders — like Singapore's Temasek — which would normally receive nothing in a bankruptcy proceeding, could get up to US$230 million from the funds seized by the DOJ, according to court documents.
Temasek already said in 2022 it would write off its US$275 million investment in FTX "irrespective of the outcome of FTX's bankruptcy protection filing". It held a 1.5 per cent stake, with the investment making up 0.09 per cent of its $403 billion portfolio as at end March 2022.
Once among the world's top crypto exchanges, FTX collapsed after news surfaced that Bankman-Fried took customer money to pay risky bets made by his hedge fund Alameda Research.
He was sentenced in March to 25 years in prison for stealing from FTX customers, and he has appealed his conviction.
US government agencies, including the Commodity Futures Trading Commission and Internal Revenue Service, agreed to let FTX prioritise customer repayment over fines and tax debts. A liquidator appointed in the Bahamas agreed to work with the company after previously challenging its authority to file for bankruptcy in the US.
FTX said the result was a victory for creditors, made possible by its ability to recover cash and crypto assets that had gone missing during its chaotic collapse. It also raised additional funds by selling other assets, including investments in tech companies like artificial-intelligence start-up Anthropic.
Customers have had a mixed response to the plan, with many expressing disappointment that FTX's demise caused them to miss out on a strong rebound in crypto prices since the market bottomed out in 2022. Some objected to the plan, demanding higher repayments reflecting recent rises in cryptocurrency values.
Mr David Adler, an attorney representing four objecting creditors, said the price of a Bitcoin, for example, has risen to over US$63,000 from its November 2022 price of US$16,000. Customers that deposited Bitcoin on FTX's exchange are finding it difficult to accept the company's claim that they are receiving a 100 per cent recovery based on those lower prices of two years ago, he added.
FTX said it was not possible to simply return the crypto assets customers deposited, because the assets were gone, misappropriated by Bankman-Fried.
At the time of its bankruptcy filing, FTX.com held only 0.1 per cent of the Bitcoin that its customers believed they deposited on the exchange, according to the company.
One of FTX's financial advisers, Steve Coverick, testified on Oct 7 that it would be "exorbitantly expensive" to purchase billions of crypto assets on the open market in order to repay customers with the same types of cryptocurrency they had before the bankruptcy.
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