A US court has approved FTX’s compensation plan, which would allow the bankrupt cryptocurrency exchange to reimburse its consumers following a two-year collapse. For the victims, who have been anticipating this day, this is great news. Some, nevertheless, are worried about how much their assets will be worth and if that would be enough to make up for the market change that began in 2022 and is still going on today.
Remember that the organization in charge of the bankrupt exchange declared its intention to reimburse consumers in May of last year, claiming that victims might get repayments totaling more than $16 billion in digital assets.
FTX Creditors to Receive up to 118% of Their Funds
On October 7, U.S. Bankruptcy Judge John Dorsey authorized the judgment at a hearing in Wilmington, Delaware. According to the plan, up to 98% of creditors with accounts worth less than $50,000 would be repaid up to 118% of their whole account value as of November 2022 when the exchange collapsed.
It’s interesting to note that this group of clients will get their repayments 60 days or less after the plan start date. But as of this writing, it’s still unclear when the plan will begin to operate. The exchange has between $14.7 billion and $16.5 billion available to refund its consumers, according to the FTX operating board. Following the massive collapse of FTX, this money was recovered in cash and cryptocurrency assets.
In the meantime, FTX continues to communicate with the US Department of Justice about the $1 billion that was taken into custody during Sam Bankman-trial Fried’s criminal trial. Court filings state that up to $230 million of the confiscated funds may be returned to FTX stockholders as a refund.
FTX Customers Expresses Disappointments
Even though FTX referred to this as a “victory for creditors,” those same creditors have expressed dissatisfaction with the amount of the repayments they will get.
According to them, FTX fell in November 2022, a time when the entire crypto market was undergoing a substantial recovery. Bitcoin was trading between $16,000 and $17,000 at the time, but it has now risen to over $62,000. Customers so demand higher payments and claim that the repayment plan does not reflect the current market value.
To put things straight, FTX emphasized that it is unable to return the precise digital assets that clients deposited in relation to their current worth as the CEO Bankman-Fried previously spent those assets.
Final Thoughts
FTX’s compensation plan approval is a positive step for creditors, marking a long-awaited milestone after the exchange’s collapse. The plan offers hope to many, especially small creditors who are expected to receive up to 118% of their lost assets, which is impressive compared to typical bankruptcy proceedings.
The swift timeline for these repayments, within 60 days of the plan’s start date, provides a sense of relief for those affected. However, the actual value of the repayments may not satisfy everyone, given the volatile nature of the cryptocurrency market and the significant changes in asset values since FTX’s collapse.
Despite FTX framing the approval as a “victory,” many creditors are understandably frustrated. The crypto market has seen significant recovery since the collapse, with Bitcoin’s price skyrocketing from around $16,000 to over $62,000.
This disparity in market value creates dissatisfaction among customers, as the repayments are based on the value of assets at the time of the collapse, not their current worth. For many, this underscores the emotional and financial toll of the collapse, as the compensation fails to capture the potential profits lost due to the exchange’s mismanagement of funds. The tension between legal restitution and market realities leaves some creditors feeling shortchanged.
