Tech
FTX will repay creditors in full, $11 billion
The saga of bankrupt cryptocurrency exchange FTX took a new turn this week, with some welcome news for creditors.
The Guardian reported it that John Ray III, a turnaround specialist who succeeded the disgraced Sam Bankman-Fried as FTX’s CEO shortly after its collapse, confirmed that once FTX sells its remaining assets, it will have more than the amount needed to repay his creditors.
FTX said it will be able to repay creditors its entire $11 billion (£8.8 billion) debt.
Image credit: FTX Arena
FTX Chapter 11
FTX had in January has abandoned efforts to restart its cryptocurrency exchangeopting instead to liquidate all assets and return funds to clients.
FTX had collapsed into Chapter 11 in November 2022 after a multibillion-dollar hole was discovered in its balance sheet.
At the time of filing for Chapter 11, Bankman-Fried resigned and was replaced by new CEO John J. Ray III.
Ray is a seasoned operator, having overseen some of the biggest bankruptcies in corporate history, including the collapse of energy giant Enron.
In total Ray has 40 years of experience restructuring companies and had promised to cooperate with federal regulators in investigating FTX founder Bankman-Fried.
And so it was he didn’t mince words in his initial assessment of FTX and Bankman-Friedsaying he had never seen anything as bad as FTX.
Sam Bankman Fried. Image credit: FTX
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of reliable financial information as has occurred here,” Ray wrote in a filing with the Delaware bankruptcy court.
“From compromised systems integrity and faulty regulatory oversight overseas, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.”
John Ray previously said his top priority was the recovery of assets to repay FTX customers and last year once again criticized Sam Bankman-Fried in a report on debtorsand claimed that FTX’s collapse was due to “arrogance, incompetence and greed”.
Asset recovery
John Ray said that once the exchange sells off its remaining assets, it could have more than $16 billion, well above its debts.
“We are pleased to be able to propose a Chapter 11 plan that provides for the repayment of 100% of bankruptcy claim amounts plus interest to non-government creditors,” the bankruptcy expert told the Guardian newspaper.
FTX has reportedly been helped by the fact that its debts are dollar-denominated, while many of its assets are highly speculative digital commodities and stakes in high-growth startups. At the time of FTX’s collapse in November 2022, one bitcoin was worth around $20,000; it now sells for more than triple that.
The Guardian also noted that FTX was helped by its large stake in the Anthropic, artificial intelligence startup.
The exchange reportedly sold that stake in March of this year, for $824 million.
On March 28, 2024 Bankman-Fried he was sentenced to 25 years in prison for masterminding an $8 billion fraud at the now-bankrupt FTX cryptocurrency exchange he founded.
In April Bankman-Fried appealed against this prison sentence.
The Guardian noted that FTX’s recovery plan still requires approval from the courts before the funds can be distributed to former depositors.