In a recent court hearing, bankrupt crypto exchange FTX stated that it intends to repay customers whose crypto deposits were locked when the company filed for bankruptcy in November 2022.
FTX Announces Repayment Plan
The defunct crypto exchange has refocused its efforts towards paying back customers instead of restarting operations. According to his statement at a court hearing, FTX attorney Andy Dietderich revealed a significant shift in the defunct crypto exchange's strategy. FTX has decided to abandon any attempts to revive its exchange operations and will now prioritize reimbursing its customers by liquidating its assets.
Dietderich clarified that the decision stemmed from fruitless negotiations with potential investors. Despite the initial intention to secure funding for restructuring efforts, FTX faced insurmountable challenges. Dietderich asserted that FTX founder Sam Bankman-Fried's lack of foundational technology and administrative structure deterred prospective investors.
According to Dietderich,
"FTX was an irresponsible sham created by a convicted felon. The costs and risks of creating a viable exchange from what Mr. Bankman-Fried left in a dumpster were simply too high.”
Bankman-Fried, convicted on fraud charges related to FTX operations, now faces potential decades in prison.
Complicated Repayment Process
Dietderich shed light on the repayment process being considered by the U.S. bankruptcy court. Claimants are required to submit proof of their lost assets on FTX, which will undergo scrutiny by restructuring advisers. However, the crucial point of contention is the date chosen for FTX's actual bankruptcy, a decision preliminarily approved by U.S. Bankruptcy Judge John Dorsey.
Dozens of customers express dissatisfaction with the use of November 2022 prices, arguing that it shortchanges their losses. Bitcoin's current value, exceeding $43,000, is a stark contrast to its roughly $20,500 valuation at the time of FTX's collapse in November.
During the recent hearing, Kris Hansen, FTX Creditor Committee lawyer, addressed the disparity in claims. Hansen noted,
"Many of those claims are premised upon currencies which declined dramatically in value in that tumultuous period leading up to the petition date."
FTX's Challenge: Overcoming a Sea of Claims
FTX, grappling with over 36,000 claims totaling around $16 billion, previously acknowledged its limitations. Last year, the exchange projected the ability to compensate only approximately 90 percent of its customers. Roughly 15 million individuals collectively lost $30 billion to $35 billion in various cryptocurrencies during FTX's demise.
Dietderich said,
“I would like the court and stakeholders to understand this not as a guarantee but as an objective. There is still a great amount of work and risk between us and that result, but we believe the objective is within reach, and we have a strategy to achieve it.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
