FTX has billions more than needed to pay bankruptcy victims

Cryptocurrency exchange FTX has raised billions of dollars more than it needs to cover what its customers lost in its November 2022 collapse, setting them up to receive a full recovery under the bankruptcy of the company.

The extra money will be used to pay interest to the company’s more than 2 million customers, a rare outcome since creditors typically receive only pennies on the dollar in U.S. bankruptcies.

“In any bankruptcy, this is just an incredible outcome,” said John Ray, CEO of FTX, who took over the company when it collapsed into bankruptcy.

Once the sale of all its assets is complete, the company will have $16.3 billion in cash to distribute, according to a company release. It owes about $11 billion to its customers and other non-governmental creditors.

Although all debts are paid in full, plus interest, nothing will be left for shareholders, according to court documents filed Tuesday evening in federal court in Wilmington, Delaware, where the FTX case is being handled.

Depending on the type of debt they have on file, some creditors could recover up to 142% of what they are owed. However, the vast majority of customers will likely be paid 118% of what they had on the FTX platform the day the company entered Chapter 11 bankruptcy.

The company, now run by restructuring advisers, also proposed creating a fund to pay certain creditors, including those who lent the FTX crypto, with money that otherwise would have gone to government regulators.

Payments will likely be expected in several months as FTX moves through the final stages of the bankruptcy case.

Earlier this year, the company had about $6.4 billion in cash. The increase is primarily due to a general surge in the prices of various cryptocurrencies, including Solana, a token heavily backed by convicted fraudster and FTX founder Sam Bankman-Fried. The company also sold dozens of other assets, including various venture capital projects, such as a stake in artificial intelligence company Anthropic.

The latest figures underline the surprising result of FTX, whose collapse has been compared to the fall of Enron Corp. fueled by fraud and the collapse of Bernie Madoff’s Ponzi scheme.

But restructuring advisers have since tracked down the company’s assets and unraveled a web of accounts scattered across the world. These rallies have been significantly shaken by the crypto rebound, which has caused the price of Bitcoin to quadruple since the end of 2022.

In a document filed Tuesday, restructuring advisers outlined new details of their proposal to distribute money to creditors and end the Chapter 11 case. Known as an information statement, the document is designed to help creditors vote on the proposed repayment plan.

U.S. Bankruptcy Judge John Dorsey will take that vote into consideration when deciding whether to approve the plan later this summer. Dorsey is expected to hold a hearing in late June on the disclosure statement and voting procedures.

FTX filed for bankruptcy in November 2022 after Bankman-Fried shut down the company’s crypto trading platform and handed control of it to insolvency experts. Bankman-Fried was later convicted of fraud.