FTX has received court approval to repay customers whose digital assets were trapped on the platform after its collapse nearly two years ago, according to a report by Steven Church and Jonathan Randles for Bloomberg.
The approval comes from U.S. Bankruptcy Judge John Dorsey, who signed off on a plan allowing FTX to compensate customers affected by the downfall of Sam Bankman-Fried’s exchange. This decision could also result in shareholders receiving part of $1 billion in seized assets.
In November 2022, after FTX imploded, customers faced the possibility of recovering only a fraction of what they were owed. However, by June 2024, FTX had accumulated $12.6 billion in assets, a figure that could increase to as much as $16.5 billion after all platform assets are sold. These assets include stakes in various ventures, such as the artificial intelligence company Anthropic.
Attorney Ken Pasquale, representing the creditors, noted that the crypto market rebound over the last year has played a crucial role in increasing the value of FTX’s assets. This increase allowed FTX to negotiate agreements with creditors and regulators, improving customer recovery prospects.
Unusually, FTX preferred shareholders could also receive some funds, a rarity in Chapter 11 bankruptcies where stockholders are often left with nothing. A portion of the funds comes from the sale of assets seized by the federal government, including $626 million from the sale of Robinhood shares previously owned by Bankman-Fried and co-founder Gary Wang.
However, some customers have criticized the repayment plan, as repayments will be made in cash rather than cryptocurrencies. This means they won’t benefit from the recent appreciation of digital assets. Payments to customers will not be immediate, as FTX is in the process of establishing a trust and hiring a firm to oversee the distribution of funds.
FTX filed for bankruptcy in November 2022, and its founder, Bankman-Fried, has since been convicted of fraud.
