When FTX crashed in November 2022, many of its clients probably thought that they wouldn’t get their money back. The cryptocurrency exchange had fallen into bankruptcy after a brief but deadly crisis mainly fueled by the maneuvers of its founder, Sam Bankman-Fried, now sentenced to 25 years in prison.
A year and a half has passed since then and people who once trusted the platform can see a glimmer of hope. The company presented this week a plan to reorganize its finances covered by Chapter 11 of the United States Bankruptcy Law. And he has promised to pay off his debts even with interest.
FTX’s plan for its clients to recover lost money
We are facing an announcement that is quite out of the ordinary. When a company goes bankrupt, the estimated time for payment of its creditors to begin It is usually five years. If everything goes as expected, former users of the exchange could recover their assets much sooner, although they will still have to wait.
Submitting the plan is only the first step of reorganization. It must be scrutinized both by Justice, in this case by Judge John T. Dorsey, and by creditors. If approved, a payment scheme would be drawn up that would prioritize clients and leave owed government taxes in the background.
The plan, however, has some items that may not be to everyone’s liking. The amount of money that clients will receive will be calculated in relation to the value of their holdings at the time of FTX bankruptcy (November 2022). This means that they will not benefit from the bull run in the cryptocurrency market.
Despite the volatility of this sector, 2024 seems to be a good year for Bitcoin, which recently broke the $69,000 barrier, although at the time of writing this article it is trading slightly above $60,000. As an example, FTX clients would receive payments with a Bitcoin value of $20,000.
In any case, those affected will have lost access to their assets for several years, so a “consensus rate” of the 9% interest. It will govern from the moment the company filed for Chapter 11 until the moment of payment, which, as we say, is not clear when it will happen.
Where did the money come from?
One of the big questions right now is how FTX has managed to raise the money needed to present its reorganization plan. The company’s new management, led by John J. Ray, resorted to several avenues to obtain funds, including venture investments that Bankman-Fried had launched.
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The recovery maneuvers, scrutinized by authorities during the bankruptcy process, included the sale of a huge amount of Solana tokens, a recovery agreement of 400 million dollars of a hedge fund called Modulo Capital and the sale of shares of companies such as Robinhood and Anthropic.
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