90% of FTX assets to return to customers in proposed settlement

Credit: Shutterstock
Credit: Shutterstock

Those who lost money during the collapse of FTX last year are set to benefit from a proposed settlement – with as much as 90% of the defunct cryptocurrency exchange’s assets being returned to customers. 

Whilst the 90% figure does not represent the money investors initially lost during the collapse – rather 90% of the total assets that remain at FTX – lawyers representing creditors are working with investors to help them get this deal secured. 

It remains unclear the extent of FTX’s current holdings, although the company did reveal it had recovered $7.3bn last April, but a time period of nine days from the moment investors pulled funds from the news of FTX’s solvency issues to the time of its collapse, would see them give back 15% of funds in exchange for freedom from bankruptcy liquidators. 

“The proposed settlement of the customer property issues is another major milestone in our case,” said John. J. Ray III, Chief Executive Officer and Chief Restructuring Officer of the FTX Debtors. 

“Together, starting in the most challenging financial disaster I have seen, the debtors and their creditors have created enormous value from a situation that easily could have been a near-total loss for customers. 

“I would especially like to recognise the important role of the independent Board of Directors who quickly responded to the call to duty at a time of crisis. They bring wisdom and guidance, often in the face of adversity, that has been and continues to be instrumental throughout the difficult process of bringing order and resolution to these cases.” 

The amended plan of reorganisation and customer recoveries update outlined key aspects into being able to deliver customers back their funds. 

  1. FTX debtors would divide all of their assets into three pools based on circumstances at the start of the bankruptcy case, segregated for the benefit of FTX customers, US customers and a ‘general pool’ segregated for other assets. 
  2. US and other customers will also benefit from a ‘shortfall claim’ against the general pool estimating value of assets missing at their exchange. 
  3. The shortfall claim is estimated to be roughly $8.9bn for FTX.com, and $166m for FTX US. 
  4. A negotiated portion of the shortfall claim would be deemed to benefit from an equitable priority against the general pool, with 66% of the general pool to be applied exclusively to pay shortfall claims. 

If the settlement is approved by creditors, it would still need clearance from the bankruptcy court, with an end goal to get this over line by July 2024. 

The ongoing trial of Sam Bankman-Fried has only further revealed the abuse of investors’ funds that had been mishandled before FTX’s ultimate collapse.