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FTX customers are ready to recover all funds lost in the collapse

Customers of failed cryptocurrency exchange FTX are poised to get back all the money they lost in the company’s collapse in 2022, plus interest, the company’s bankruptcy lawyers said Tuesday.

The announcement was a milestone in an attempt to recover the $8 billion in customer assets that disappeared when FTX imploded virtually overnight, triggering a crisis in the crypto industry. Under a plan filed in federal bankruptcy court in Delaware, virtually all of FTX’s creditors, including hundreds of thousands of ordinary investors who used the exchange to buy and sell cryptocurrencies, would receive cash payments equal to 118 percent of the assets they had stored with FTX. said the lawyers.

Those payments would come from a pool of assets assembled by FTX’s lawyers in the 17 months since the exchange’s collapse, the lawyers said.

But the recoveries come with a caveat. The amount owed to customers was calculated based on the value of their holdings at the time of FTX’s bankruptcy in November 2022. This means customers will not reap the benefits of the recent crypto market boom that caused the bankruptcy Bitcoin price at a record high. For example, a customer who lost a Bitcoin when FTX imploded would be entitled to less than $20,000, even though a Bitcoin is now worth more than $60,000.

It will take months for payouts to begin. The plan must be approved by the federal judge overseeing FTX’s bankruptcy, John T. Dorsey.

Still, a major recovery in customer funds seemed unlikely as FTX collapsed following a surge in deposits. Before its implosion, customers used FTX as a marketplace for buying and selling digital currencies and stored billions of dollars in cryptocurrencies on the platform.

After the implosion, FTX founder and CEO Sam Bankman-Fried resigned and handed control to John J. Ray III, a veteran of corporate turnarounds who oversaw Enron’s unwinding.

Mr. Bankman-Fried was later convicted of gross fraud In doing so, he drained billions of dollars of customer savings to finance venture investments, political donations and other expenses. He was sentenced sentenced to 25 years in prison in March.

After taking over, Mr. Ray described the company as the biggest mess he had ever seen it. But over the next few months, he and his team began the arduous search for the missing assets.

Some of the recoveries were due to successful investments made by Mr. Bankman-Fried during his tenure at FTX. In 2021, the company had invested $500 million in artificial intelligence company Anthropic. A boom in the AI ​​industry made these stocks much more valuable. This year, Mr. Ray’s team sold about two-thirds of FTX shares for $884 million.

FTX has also entered into an agreement to recover over $400 million Modulo capital, a hedge fund that Mr. Bankman-Fried had financed. And lawyers for FTX filed lawsuits seeking to recover funds from former company executives and others, including Mr. Bankman-Fried Parents.

Crypto experts have been expecting significant recoveries from the FTX bankruptcy for months. Some opportunistic investors have purchased bankruptcy claims from the exchange’s customers for pennies on the dollar, hoping to profit when payouts begin.

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