FTX/crypto
FTX's bankruptcy plan has been approved nearly two years since the crypto exchange founded by Sam Bankman-Fried collapsed. AFP

KEY POINTS

  • Judge Dorsey said the FTX estate's handling of the crypto exchange's collapse is a 'model case'
  • Ray said FTX is poised to return 100% of the bankruptcy claim amounts
  • There were mixed reactions to the development, with some asking whether customers will get the amount they 'deserve'

Nearly two years since its stunning collapse that triggered an arduous crypto winter, cryptocurrency exchange FTX has been cleared to proceed with its bankruptcy plan, allowing the fallen exchange to fully repay customers up to $16.5 billion in digital assets recovered since November 2022.

Multiple outlets reported that U.S. Bankruptcy Judge John Dorsey approved the bankruptcy plan at a court hearing in Delaware on Monday. The plan involves a series of settlements with both FTX customers and creditors and other liquidators.

Dorsey said the FTX estate's success in handling the aftermath of the collapse turned the collapsed former crypto darling into "a model case for how to deal with a very complex Chapter 11 bankruptcy proceeding."

"The Court's confirmation of our Plan is a significant milestone on our pathway to distributing cash to customers and creditors. Today's achievement is only possible because of the experience and tireless work of the team of professional supporting this case," said FTX Chief Restructuring Officer John J. Ray III.

What Happens Next?

According to the bankruptcy plan, a total of 98% of FTX creditors will receive "approximately 199% of the amount of their allowed claims within 60 days after the effective date of the Plan." The said distribution provision is subject to KYC (know-your-customer) verification and other necessary distribution requirements.

FTX said it estimates its total recovered assets and properties, when converted to cash, are between $14.7 billion and $16.5 billion. The said figures already include assets controlled by bankruptcy debtors and other assets controlled by various private parties that helped in the defunct exchange's recovery efforts.

Ray said following the court's approval that FTX is poised to return 100% of the bankruptcy claim amounts "plus interest for non-governmental creditors." Customers and creditors across 200 jurisdictions worldwide are expected to be covered by the distribution process.

He went on to thank creditors and customers for their patience following the nearly two-year demise of what was once one of the most popular crypto exchanges in the industry.

Crypto Users Welcome Development

The crypto community on X welcomed the news, with some pointing out how FTX customers may receive their claims just in time for the last quarter of the year – a period that has historically been positive for the crypto market.

Others are expecting altcoins – digital currencies beyond Bitcoin — to surge once FTX customers get paid "knowing that FTX users are degens." The term degens is used by crypto users to describe people who put their money in high-risk or speculative investments.

Some users weren't as pleased. Others pointed out that an approval doesn't mean FTX users will immediately get their funds, while some raised the issue of whether customers who lost their funds "truly get what they deserve."

It remains to be seen how the distribution process will go, considering how roughly $8 billion in customer funds went missing when FTX fell from grace – excluding FTX debts to investors.

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