About two years after the crypto exchange FTX collapsed and many of its leaders faced legal issues, a court decision on Oct. 7 marks progress in repaying FTX users.
United States Bankruptcy Judge John Dorsey has approved a plan for the failed cryptocurrency exchange FTX to shut down its operations and work on repaying users.
During a hearing on Oct. 7 in the US Bankruptcy Court for the District of Delaware, Judge Dorsey approved FTX’s liquidation plan. This plan will allow the exchange to repay 98% of users around 119% of their claimed account value. This court ruling comes nearly two years after FTX first filed for bankruptcy in November 2022, which led to criminal charges and civil lawsuits against some executives.
“The Court’s approval of our Plan is an important step towards distributing cash to customers and creditors,” said John J. Ray III, CEO and chief restructuring officer of FTX. He added that they are on track to return 100% of bankruptcy claim amounts plus interest for non-government creditors, which will be the largest and most complicated bankruptcy asset distribution in history.
Not Everyone Agrees with the Plan
Some critics of the reorganization plan have pointed out that while it aims to reimburse creditors for their assets on FTX, it does not take into account the potential gains in value of tokens from November 2022 to 2024. Sunil Kavuri, an FTX creditor who was at the bankruptcy hearing, claimed in September that users might only get back 10–25% of their cryptocurrency value.
When FTX declared bankruptcy in 2022, Bitcoin’s price was around $16,000. At the time of writing, it has risen to more than $63,000. Millions of users have been unable to access billions of dollars worth of tokens in their FTX accounts for almost two years.
Some of FTX’s former executives are expected to spend years in prison due to their roles in the company’s collapse. A judge sentenced former CEO Sam Bankman–Fried to 25 years in prison after his trial and conviction in 2023. On Sept. 24, former Alameda Research CEO Caroline Ellison received a two-year prison sentence.
It remains unclear when FTX will start reimbursing users following Judge Dorsey’s ruling. In September, false rumors spread online about FTX claims being settled. The distribution of billions in funds to crypto users could affect the market, similar to how the Mt. Gox repayments did in July 2024.
Summary Review: In a significant move for FTX users, a U.S. Bankruptcy Judge approved the exchange’s liquidation plan, allowing for the repayment of approximately 98% of users around 119% of their claimed account value. This decision comes nearly two years after FTX filed for bankruptcy and many of its executives faced legal consequences. However, concerns remain regarding the plan’s failure to account for potential token value increases since the bankruptcy filing. As FTX prepares for the largest bankruptcy asset distribution in history, it remains unclear when reimbursements will begin, leaving millions of users without access to their funds for an extended period.
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