FTX, the cryptocurrency firm that collapsed in November 2022, has received court approval to fully repay its customers, whose digital assets were locked when the exchange went under. U.S. Bankruptcy Judge John Dorsey approved the payments under a plan developed by advisers who took control after Sam Bankman-Fried’s fraud-tainted exchange went bankrupt.
Initially, creditors were expected to recover only a portion of their funds, but FTX’s financial situation has significantly improved, now holding $12.6 billion, a figure that could rise to $16.5 billion. This was made possible by asset sales, including FTX’s stake in AI company Anthropic, and the crypto market’s rebound in the past year.
Shareholders, who are typically wiped out in bankruptcy cases, may also receive part of the $1 billion in seized assets, including $626 million from the sale of Robinhood stock owned by Bankman-Fried and co-founder Gary Wang. However, the exact payout to preferred shareholders remains uncertain, as negotiations with federal prosecutors are ongoing.
While customer repayments will be made in cash rather than crypto, some clients have voiced concerns that this decision prevents them from benefiting from the surge in crypto prices. FTX’s utility token, FTT, will not hold any value in the repayment plan.
Customer repayments will not happen immediately, as FTX needs to establish a trust and hire a firm to manage the process. The firm’s remaining digital assets, like Solana, were managed and sold by Galaxy Digital Capital Management, contributing to the firm’s improved financial position.
FTX filed for bankruptcy after Bankman-Fried closed the platform and handed control to insolvency experts. He was later convicted of fraud.