The former leading crypto exchange FTX is close to repaying funds to its creditors and former investors following its bankruptcy and fraud scandal in 2022. This is how things are going now.
Big step for FTX investors: Is the wait now over?
In a statement from current FTX CEO John J. Ray III on November 21, 2024, it was announced:
“We are pleased to announce that we will begin distributing proceeds in early 2025. The timeline presented reflects the experience and continued work of the team of professionals assisting debtors who have already recovered billions of dollars on behalf of FTX’s creditors and customers. While we continue to take actions to maximize repayments, we are working diligently to reach agreements with our distribution agents and return proceeds to creditors and customers as quickly as possible.”
The first repayments will be made to the so-called “convenience classes” of the restructuring plan, i.e. to customers and creditors with eligible claims, the press release states. The deadline for the first payment is set at 60 days after the plan comes into force, which is planned for early January 2025. The debtors want to announce the exact effective date by the end of December.
According to the press release, agreements with the specialized distribution agents responsible for the global refund are expected to be finalized in early December. These agents will provide customers with instructions on how to set up their approved accounts. Additionally, all eligible customers must create a verified account and submit the necessary tax forms by the deadline to receive their refund.
Fight for billions: The legal disputes with FTX
As announced by the U.S. Commodity Futures Trading Commission (CFTC) in August 2024, the U.S. District Court ordered FTX to pay 12.7 billion USD in financial compensation to FTX customers and victims of the FTX scam. The order requires FTX to pay 8.7 billion USD in restitution and 4 billion USD in repayment, which will be used to provide further compensation for victims’ losses caused by the “massive fraudulent scheme of Samuel Bankman-Fried, his now bankrupt FTX Group, and a core group of FTX insiders,” according to the CFTC.
FTX’s bankruptcy process is marked by numerous legal challenges. The original restructuring plan met with resistance. In particular, the amount of repayments at the time of the application, when crypto prices were significantly lower than today, caused discontent among creditors. This led to a series of legal proceedings being initiated to recover further assets for investors. The insolvency administrators are now reportedly focusing on recovering funds from companies such as KuCoin, Crypto.com, SkyBridge Capital and Binance.
FTX investors on hold: A drama without end?
The FTX bankruptcy, which is overshadowed by a massive fraud scandal, may be slowly coming to an end, but the challenges for creditors and former customers are far from over. Repayments to customers could take years as legal and financial disputes continue. It is also questionable whether all creditors will be happy with the payout arrangement, as crypto values have since recovered significantly.
Overall, the FTX case remains a prime example of the risks and complexities in the volatile crypto market and highlights the challenges faced by both the investors affected and those responsible.
