FTX has billions more than needed to repay bankruptcy victims

Bankrupt cryptocurrency exchange FTX has raised billions of dollars of extra money to fully pay off the debts of its 2 million customers, marking a new development in bankruptcy cases.

FTX, the cryptocurrency exchange that went bankrupt in late 2022, accumulated billions of dollars more than it needed to cover losses incurred during the November 2022 crash. In a comment to Bloomberg, FTX CEO John Ray called the milestone an “incredible result,” signaling that the exchange is ready. It will issue full refunds to its more than 2 million customers.

With the pending sale of its assets, FTX is expected to have about $16.3 billion in cash, Bloomberg noted, exceeding its $11 billion in debt to customers and other nonprofit creditors. While bankruptcy victims will receive full payments with interest, court documents show stockholders are unlikely to receive the remaining amount.

Depending on the types of claims, some creditors could potentially recover up to 142% of amounts owed, while most customers could receive up to 118% of their account balances at the time of FTX’s bankruptcy filing.

FTX’s restructuring advisors suggested establishing a fund to compensate certain creditors for losses using funds that would otherwise be allocated to regulators. However, the timeline for this initiative remains unclear, but payments are expected to be made in the coming months. Amid the news, the exchange’s native token, FTX Token (FTT), surged over 33% to $2, according to data from CoinMarketCap.

FTX collapsed in November 2022 amid allegations of embezzlement and misuse of billions of dollars in client funds involving its owners and affiliated hedge fund Alameda Research. The exchange’s founder, Sam Bankman-Fried, was sentenced to 25 years in prison and ordered to pay back $11 billion.