FTX declared "extra money" to compensate investors for losses

GhSo...taPv

9 May 2024

FTX said it can compensate 98% of users with assets stuck on the exchange for up to 118% of their refund request.

The takeover of bankrupt cryptocurrency exchange FTX on May 7 (US time) announced a new compensation plan for users and creditors of the platform, pledging to Return all assets to related parties.

Specifically, FTX's plan affirms that after a 17-month asset recovery process, from the time the exchange went bankrupt in November 2022 to May 2024, the takeover unit is estimated to have successfully restored 14 .5 - 16.3 billion USD in assets, ready to be returned to customers.

Because the recovery amount has exceeded FTX's deficit at the time of the platform's collapse, which was about 8-10 billion USD, the FTX takeover unit claims to be able to compensate 98% of all digital FTX users. up to 118% of the property value is required to be repaid within 60 days from the time the plan is approved by the court. This is a group of customers with compensation value of 50,000 USD or less.

The remaining customers will all receive 100% of the assets requested to be returned, plus an interest rate of 9% for the period of "detention".

FTX announced that it is negotiating with US government agencies to resolve tax requirements and fines for the exchange's fraudulent behavior, including:

- Reducing the Internal Revenue Service's (IRS) request for $24 billion in back taxes to $200 million in cash and $685 million in fines, with priority ranked after returning assets to customers and investors. private;

- Re-agree with the IRS on tax payment requirements related to the return of assets to investors plus 9% interest;

- Re-agree with the US Department of Justice (DOJ) to withdraw the request to pay a fine of 1.2 billion USD, using that money to compensate FTX investors;

- Re-agree with the Futures Trading Commission (CFTC) and other government agencies to revoke the request to pay the fine, using that money to compensate FTX investors;

- Agreement with customer groups outside the US who are suing FTX in exchange for withdrawing the lawsuit in exchange for the priority right to receive compensation;

- Compensation agreement of 875 million USD for BlockFi, FTX's largest creditor.

Mr. John J. Ray III, CEO who took over FTX after the exchange went bankrupt, commented:

“We are pleased to have established a compensation plan that will return 100% of assets to customers and investors, plus interest. On behalf of the FTX board of directors, I would like to thank the U.S. government agencies [...] for working together in the recovery process. Finally, I would like to thank all FTX customers for their patience during this time.”

The above compensation plan will be submitted to the Delaware Bankruptcy Court and must be approved before it can be implemented.

Although it is unclear what the actual compensation amount is, FTX investors may still suffer losses because the compensation value is calculated at the time the platform goes bankrupt on November 11, 2022, instead of according to actual market value. The reason is because the cryptocurrency market since the end of 2023 has increased strongly, with many coins growing by 60-100% in value compared to the time FTX collapsed.

As reported by Coin68, FTX has been actively liquidating assets on the exchange in recent times, most recently offering to sell locked SOL to large investment funds and shares in the AI Anthropic company.

Former FTX CEO Sam Bankman-Fried was sentenced by a US court to 25 years in prison for his responsibility in the process leading to the collapse of the world's second largest trading platform, once valued at 40 billion USD.

FTX's FTT token price is increasing by 16% at the time of writing after the exchange announced a refund of up to 118% of assets to 98% of users, although the takeover unit previously confirmed the "death" of this currency. and no longer has anything to do with FTX.

Previously, the representative of FTX's largest creditor group proposed to vote against the compensation plan with an amount of up to 118% of the refund request of users with stranded assets.

FTX's largest group of creditors proposed rejecting the compensation plan

As Coin68 reported, the takeover of bankrupt cryptocurrency exchange FTX on May 7 (US time) announced a new compensation plan for users and creditors of the platform. , thereby committing to return all assets to related parties.

However, Mr. Sunil Kavuri, representative of FTX's largest group of creditors, proposed voting against FTX's restructuring plan.

Mr. Kavuri maintains the opinion that the FTX fund should pay in cryptocurrency instead of USD value at the time the exchange files for bankruptcy. He argued the debtors owed FTX customers up to 10 times more than the value of the bankruptcy petition, and accused them of having “destroyed an estimated more than $10 billion” in the value of FTX creditors.

FTX debtors have previously been criticized for their handling of the fund's assets. For example, FTX sold its investment stake in Mysten Labs and the right to buy $96 million worth of Sui tokens just before the token was listed. Currently, this token alone is worth 935 million USD.

Kavuri also mentioned the current lawsuit against Sullivan & Cromwell - the New York law firm handling the bankruptcy process for FTX - regarding the company's "adulterated" relationship with the exchange before its collapse. . He stated that the plan includes an immunity clause “so that they and those involved cannot be sued for wrongdoing.” According to previous statistics, FTX had to spend an average of 25 million USD per month on Sullivan & Cromwell for consulting and legal fees.

Law firm Sullivan & Cromwell was also chosen to oversee Binance after the $4.3 billion settlement agreement between the exchange and the US Department of Justice in November 2023. The custodian has access to a wealth of information, including the exchange's records, facilities and employees, and is tasked with using that data to conduct assessments and submit regulatory reports. period for the government.