Collapsed cryptocurrency exchange FTX is set to return $16 billion to customers after receiving court approval for its bankruptcy plan. Following nearly two years of intense recovery efforts, U.S. Bankruptcy Court Judge John Dorsey has approved the plan, which focuses on using recovered funds to repay former clients.
FTX’s Rise and Fall
FTX once dominated the crypto industry, rapidly gaining prominence. However, in November 2022, the exchange faced an unexpected liquidity crisis, leading to its collapse. Co-founder and former CEO Sam Bankman-Fried was charged with fraud and mismanagement, resulting in a 25-year prison sentence. His legal team has filed an appeal, claiming that he was “presumed guilty” throughout the trial.
The Bankruptcy Plan
The approved FTX bankruptcy plan will return $16 billion to customers. These funds were recovered through various settlements and legal efforts after the company’s collapse. The plan guarantees that most customers will receive at least 118% of their U.S. dollar account balances as of November 2022.
While many customers hoped to be repaid in cryptocurrency—due to increases in assets like Bitcoin over the last two years—the court will issue the payments in cash. This decision has sparked some discontent among investors, but it marks a critical step toward resolving FTX’s collapse.
The Road to Recovery
FTX’s bankruptcy process has been long and complex, involving multiple settlements and legal battles. Despite disappointment over not receiving their original crypto assets, the FTX bankruptcy plan offers a clear path to recovery for customers, many of whom have waited almost two years to reclaim their funds.
FTX’s downfall serves as a powerful reminder of the risks associated with cryptocurrency investments. The collapse has led to increased scrutiny and sparked discussions about stronger regulations to safeguard investors and improve transparency in the crypto world.
Learn More About Bankruptcy Cases in Crypto
For more insights into how bankruptcy in the cryptocurrency industry is reshaping investor protections, check out our analysis of the Mt. Gox bankruptcy case here.
