A U.S. bankruptcy judge just approved FTX’s plan to repay customers billions of dollars as the company moves closer to resolving its bankruptcy case.
Court approval and customer refunds
Judge John Dorsey granted approval during a hearing in Wilmington, Delaware, where the bankruptcy plan had already gained strong support from FTX creditors.
The plan allows FTX to reimburse its former customers using $16 billion in assets that have been recovered since the company’s collapse.
This means that customers will receive full refunds along with interest, which is pretty unusual in such cases.
The approved plan includes settlements with former customers, creditors, U.S. government agencies, and liquidators who are managing FTX’s operations outside the United States.
Customers will be paid first, and after that, FTX can address claims from government regulators.
Customers are set to receive at least 118% of the value of their assets as of November 2022. The court still needs to decide when this settlement plan will take effect.
Reactions and future implications, are we happy or sad?
Government bodies like the IRS and the CFTC already agreed to hold off on high-value claims against FTX until all creditors are paid back. The IRS will receive $200 million upfront as part of this agreement.
FTX raised extra funds by selling its assets, including investments in various tech companies, but customer reactions have been mixed.
Many customers expressed disappointment over the collapse of FTX, which prevented them from benefiting from a strong recovery in the crypto market.
Some have voiced objections to the repayment plan and are calling for higher refunds due to recent increases in crypto prices.
Bittersweet sentiment
With crypto values significantly higher now, creditors believe their claims would be worth much more if calculated based on current market conditions instead of their value at the time of bankruptcy.
This situation has led to frustration among FTX customers who feel they aren’t being compensated fairly.
Frustration is understandable, but also worth to remember, 2022 value is still way-way more than the zero.
Judge Dorsey also shared that this case serves as a model for handling complex Chapter 11 bankruptcy proceedings, praising those involved in the negotiation process.
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