FTX clients are raging because only 25% of lost assets are ready to recover!

The bankrupt cryptocurrency exchange FTX made some last-minute changes to its payment plan for creditors. And the news wasn’t good for former clients. After all, it will only pay between 10% and 25% of what is owed to the platform’s crypto holders.

On the other hand, the company allocated $230 million in proceeds from government confiscated assets for the benefit of shareholders. According to FTX creditor and activist Sunil Kavuri, the company is transferring 18% of the DOJ’s confiscation funds to shareholders.

FTX is transferring 18% of DOJ forfeiture funds up to $230m to FTX equity holders (Plan supplement)

FTX crypto holders are getting 10% to 25% of their crypto back pic.twitter.com/3f6BePpoNU

— Sunil (FTX Creditor Champion) (@sunil_trades) September 28, 2024

Therefore, the agreement in question ended up benefiting shareholders much more, leaving former clients affected by the company’s closure in the background.

FTX will use lower cryptocurrency prices

The revision of the repayments was a surprise to creditors, who were unaware of this provision. Apparently, the agreement was finalized after creditors voted on a liquidation plan, with disclosure coming only 30 days after the final deadline.

In a bankruptcy process following Chapter 11 of the U.S. Code, shareholders are usually the last to receive reimbursement, after creditors.

According to the case information, both the debtors and preferred shareholders “have an interest in avoiding the costs, expenses, and delays associated with litigation in connection with the Plan and Confiscation Procedures.”

When considering the agreement revision, “extra money is being transferred to shareholders,” Sunil explained in a conversation on X. Additionally, he noted that creditors will receive their reimbursement based on the petition date, when cryptocurrency prices were lower than they are today.

For example, Bitcoin was trading at $16,000 when the petition was filed. However, it was already valued at $61,470 at the time of writing this article. Therefore, it’s no surprise that the case has sparked protests from FTX creditors, who are also feeling left behind in this regard.

News sparks outrage among FTX clients

Sunil pointed out that the new agreement document has already caused many FTX clients mental distress and panic attacks. After all, their savings were stolen, and justice doesn’t seem to be doing its part for fair restitution.

FTX creditors took to social media to criticize the agreement and express their dissatisfaction. One user wrote:

“It’s disgusting that they put this in the plan so late, after the vote.”

Another creditor commented that FTX had “deceived” the platform’s cryptocurrency holders “twice.” On the other hand, the FTX token (FTT) surged 60% in the last 24 hours, with trading volume spiking by 3,734%. As a result, it became the highest-performing asset on the market by a large margin.

The sudden increase was unusual. After all, the token had dropped more than 90% after FTX’s fraudulent activities were exposed, leading to the company’s bankruptcy in 2022. FTT is currently trading at $2.18. However, it has no intrinsic value.

Former CEO sentenced to two years in prison

In a recent development of the FTX case, former Alameda Research CEO Caroline Ellison was sentenced to two years in prison in the U.S. Alameda was FTX’s “sister” exchange, and both were founded by Sam Bankman-Fried.

Ellison’s conviction came from the Southern District of New York on September 24. Despite her involvement with Bankman-Fried and FTX, the executive cooperated with the investigation, which helped reduce her sentence.

The case judge, Lewis Kaplan, described Ellison’s cooperation with prosecutors as “remarkable.” However, he did not waive the sentencing. According to Reuters, Kaplan reportedly said:

“I don’t believe you’ll do anything like this again, I’m convinced (…) But the question is: if this wasn’t the largest financial fraud ever perpetrated in this country or any other, it came very close to it.”

Due to her cooperation with justice, the former CEO will also serve her sentence in a low-security prison. Additionally, she could be released early for good behavior.

Ellison’s testimony against Bankman-Fried was central to the FTX founder’s conviction earlier this year.

He was sentenced to 25 years in prison for orchestrating a massive fraud against the platform’s investors. According to the verdict, Bankman-Fried misappropriated client funds and made risky investments with them.

The exchange, which had to close its doors in 2022, reached a $12.7 billion settlement for creditor payments in August. This settlement was made with the U.S. Commodity Futures Trading Commission (CFTC).