After a long and arduous two-year process, the court judge has finally given the go-ahead for the FTX bankruptcy leaders to release funds to the majority of FTX creditors. This decision comes after FTX, once the second-ranked top crypto exchange, collapsed in November 2022 amidst reports that the exchange was not holding customers’ funds securely. It was later discovered that FTX co-founder Sam Bankman-Fried had misused customers’ funds for personal gain, leading to his incarceration.
Judge John Dorsey of the U.S. Delaware Bankruptcy Court approved FTX’s bankruptcy plan on October 8, 2024, bringing an end to the lengthy proceedings that followed the exchange’s downfall. Under the approved plan, 98% of creditors will receive at least 118% of their claims in cash, although the payout is calculated based on the value of the claims at the time of the bankruptcy.
While the news of the approved bankruptcy plan has brought relief to many FTX creditors, some have raised objections to the compensation structure. The exchange has decided to provide compensation in USD, equivalent to the trade prices in November 2022. This means that some creditors may only receive a fraction of their actual funds, with reports suggesting payouts of around 10% to 25%.
Legal experts in the crypto industry have hailed the FTX bankruptcy proceedings as one of the most efficient for a crypto firm, completing everything within a relatively short two-year timeframe. This stands in stark contrast to the Mt. Gox exchange bankruptcy, which dragged on for a decade. While many are grateful for the resolution of the FTX case, there are still dissenting voices who believe that the rules and laws governing the bankruptcy were manipulated to reduce the compensation owed to FTX creditors.
Overall, the approval of the bankruptcy plan marks a significant step towards resolving the fallout from FTX’s collapse. It remains to be seen how creditors will react to the payouts and whether any further legal challenges will arise in the aftermath of the decision.