Bankrupt cryptocurrency exchange FTX has raised billions more than it needs to fully repay customers who lost money in its November 2022 collapse.
In contrast to typical U.S. bankruptcy proceedings, FTX recently received a 25-year prison sentence for its former CEO Sam Bankman Freed, but its failure was enough to cover the interest. The newspaper reports that he also has significant funds. bloomberg.
Once all asset sales are completed, FTX will have up to $16.3 billion in cash available for distribution (up from about $6.4 billion earlier this year), the company said in a statement.
The company owes about $11 billion to more than 2 million customers and other non-governmental creditors.
“This is just an incredible outcome for any bankruptcy,” said FTX CEO John Ray, who took over the company when it went bankrupt.
Bloomberg reports that while junior creditors have traditionally received just a penny on the dollar for their shares in bankrupt companies, FTX is a strong contender for crypto tokens like Bankman Freed-backed Solana. benefiting from the rise.
FTX will repay the debt in full, plus interest, according to documents reviewed by Bloomberg, but stockholders will not be able to pay their debts, according to documents filed Tuesday night in federal court in Wilmington, Delaware, where the FTX lawsuit is being filed. There will be very little left. Currently being handled.
When a company goes bankrupt, the company’s owners cannot collect anything until the company’s debts are repaid in full.
In this case, U.S. regulators and the Internal Revenue Service likely have a claim large enough to wipe out shareholders, Bloomberg reported.
FTX’s major shareholders include venture capital firm Sequoia Capital, private equity firm Thoma Bravo, Singapore’s Temasek Holdings and Ontario Teachers’ Pension Plan, according to a court filing last year, according to Bloomberg. .
Celebrities such as Tom Brady and his ex-wife Gisele Bundchen also own common stock.
Creditors are also missing out on this year’s significant rise in cryptocurrency prices, as their claims are settled by the date FTX begins bankruptcy proceedings in 2022 under U.S. bankruptcy law.
Since then, the price of cryptocurrencies has increased dramatically.
“The reality is that only 25% of Bitcoin will come back. It will take years,” said UK-based Arsh Sehgal, a member of the FTX unsecured creditors committee. I went down.
Still, the news has recently driven up creditor claims, with some now trading at more than 100% of their face value, people told Bloomberg.
Many of these bonds were trading at just 3 cents on the dollar immediately after the bankruptcy filing.
Bankman Freed has vowed to repay his victims in full ever since his company went bankrupt.
“All we can do as a bankruptcy team is monetize that value and distribute it,” Wray said, noting that no other bankruptcy case involved so many creditors, according to Bloomberg. . “You can’t create a coin or token that doesn’t exist. And this is the next best thing.”
“I’ve never seen a case with 2 million customers,” Ray added. “I’ve never seen anything close to that.”
However, U.S. District Judge Lewis Kaplan, who prosecuted the case, said during sentencing: “Defendants’ assertion that FTX customers and creditors will be paid in full is misleading. It is logically flawed and speculative.”
Rental car giant Hertz and American Airlines are among other major U.S. companies that have recently gone through bankruptcy and were able to get all their money back to creditors.
Before Bankman Fried was sentenced to 25 years in prison for misappropriating FTX users’ funds to cover an $8 billion debt, he told corrections officers at Brooklyn’s Metropolitan Detention Center about Solana and its business associates. He recommended a decentralized blockchain platform of the same name. He worked at its sister company, Alameda Research, a hedge fund that went bankrupt.
FTX also sold dozens of assets, including a stake in artificial intelligence company Anthropic and various venture capital projects, in order to stockpile more cash and fully repay investors, according to Bloomberg.
