FTX, the bankrupt cryptocurrency exchange, is proposing a new plan to compensate victims of its 2022 collapse. The exchange proposed to repay all creditor claims and provide “billions in compensation for the time value of their investments.”
FTX Compensation Plan Targets Claims Below $50,000
According to the FTX release, the proposed Chapter 11 plan is “subject to being finalized and approved” by the United States Bankruptcy Court for the District of Delaware. Although the announcement might sound promising, some industry stakeholders argue the plan may fall short of addressing all creditor concerns.
The proposal targets creditors holding claims below $50,000, offering them 118% recovery. This rate, FTX believes covers “98% of the creditors of FTX by number.” Although the FTX’s proposal offers compensation, some critics disagree with their proposal.
Notably, the plan is to reimburse creditors based on the value of their assets at the time of the bankruptcy in November 2022. This approach differs from compensation based on current prices. Given the substantial rise in the crypto world, many consider it a rip-off. For instance, Bitcoin (BTC) has risen by nearly 280% since November 2022, the same as other cryptocurrencies.
FTX CEO and Chief Restructuring Officer John J. Ray III stated, “We are pleased to be in a position to propose a Chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors.”
The Controversy and Criticism
The total estimated distribution to creditors is expected to range between $14.5 and $16.3 billion. Notably, the proposed repayment will come in about 60 days after the plan’s effective date.
Some industry figures expressed skepticism about the proposal’s fairness despite the assurances from FTX. Mike Belshe, CEO of BitGo, voiced his concerns on X.
“I understand why the bankruptcy process needs to work this way but let’s not pretend victims are getting their money back,” Belshe stated. The BitGo CEO’s remark reflects the disappointment among creditors who hoped for compensation that accounts for the cryptocurrency market’s growth since the bankruptcy.
FTX’s collapse in November 2022 left an impact on the cryptocurrency industry, revealing an $8 billion shortfall in the company’s finances. The new management has since been working to recover lost funds through various means. This includes the $884 million sale of shares in artificial intelligence firm Anthropic in March 2024.
