Court Approves FTX Repayment Plan

The green light from a U.S. judge sets FTX on a path to repay creditors 119% of claims, using $16 billion in recovered assets.

In a pivotal moment for the collapsed cryptocurrency exchange FTX, a U.S. bankruptcy court has approved its Chapter 11 reorganization plan. The decision, handed down by Judge John Dorsey on October 9, 2024, sets the stage for full repayment to FTX’s creditors, marking a critical step in resolving one of the cryptocurrency industry’s most high-profile collapses.

FTX’s reorganization plan involves the use of approximately $16 billion in recovered assets to repay creditors. These funds were gathered through asset liquidation, international partnerships, and cooperation with regulators. The plan aims to provide 98% of creditors with a 119% recovery of their approved claims, including the principal amount owed plus interest. The distribution is expected to occur within 60 days of the plan’s implementation, with available funds estimated to be between $14.7 billion and $16.5 billion.

John J. Ray III, FTX’s CEO and Chief Restructuring Officer, lauded the efforts that led to this outcome, emphasizing the role of his team in reconstructing the exchange’s financial records and recouping billions of dollars globally. “This approval represents a crucial milestone for FTX and our creditors, marking the culmination of countless hours of work to rebuild the trust of those affected by the collapse,” Ray noted.

The court’s approval also had a ripple effect in the cryptocurrency market, with the value of FTX’s native token, FTT, surging over 50% immediately after the decision, peaking at $3.23. However, the token’s price later stabilized at around $2.72, as per CoinGecko data. Despite the surge, Judge Dorsey made it clear in his ruling that the FTT token holds no inherent value in the context of the bankruptcy proceedings.

Support for the reorganization plan was strong among creditors, with 94% of them, representing claims worth approximately $6.83 billion, voting in favor of the proposal. This overwhelming backing likely played a role in the court’s decision to move forward with the plan, offering a path for creditors to reclaim their funds after nearly two years of uncertainty.

While the exact timeline for the plan’s implementation has not been specified, Ray indicated that FTX is working with specialized agents to ensure the safe and efficient distribution of funds across more than 200 jurisdictions worldwide. This global coordination effort reflects the complex nature of FTX’s operations and the scale of its impact on the international crypto community.

FTX’s downfall in late 2022 sent shockwaves through the industry, revealing significant mismanagement and misuse of customer funds for high-risk investments. The collapse triggered a wave of legal actions, including criminal charges against key figures like former CEO Sam Bankman-Fried. Bankman-Fried, who faced convictions for fraud and conspiracy, received a 25-year prison sentence, though he has since appealed the decision. Caroline Ellison, former CEO of Alameda Research, a sister company to FTX, also faced legal repercussions, receiving a two-year sentence and an $11 billion forfeiture order.

The approval of FTX’s reorganization plan offers a critical turning point, providing a potential resolution for creditors and a precedent for handling similar cases in the cryptocurrency sector. It underscores the broader industry’s efforts to rebuild after the collapse and could help restore some trust in crypto markets. As the plan transitions into the implementation phase, the focus will be on ensuring that the repayment process is smooth and equitable for all affected parties, setting a new standard for how major crypto failures are addressed in the future.

photo source / Blockonome