FTX to Repay Debts in Full After Sam Bankman-Fried's Fraud

FTX, a bankrupt cryptocurrency exchange, has proposed a plan to discharge its $11 billion debts, boosted by bitcoin prices.

John Ray III, who took over after Sam Bankman-Fried left the exchange, said he would repay creditors with interest, perhaps topping $16 billion after asset liquidation, according to a report from The Guardian.

In a prepared statement, FTX CEO John Ray expressed satisfaction with the proposed Chapter 11 plan and assured creditors of full repayment with interest.

Ray noted that the firm is "pleased to propose a Chapter 11 plan" securing the recovery of "100% of bankruptcy claim amounts plus interest for non-governmental creditors."

FTX's fiat-currency debt contrasts with its speculative digital assets and startup holdings, boosting its position. Bitcoin's value has risen since the exchange's November 2022 collapse, boosting liquidation.

FTX Has More Than Enough Funds to Pay Debts

While legally entitled to full repayment, former customers, who make up a large number of creditors, may regret selling their Bitcoin holdings at cheaper prices during the exchange's turbulent era.

In March, FTX sold its $824 million stake in AI firm Anthropic, which helped it recover.

During his trial, Bankman-Fried cited projected creditor repayments to reduce his 25-year sentence for fraud that brought down the firm. However, Judge Lewis Kaplan denied this claim, comparing it to speculative gambling with stolen money. Notably, before paying previous depositors, the court must approve the repayment plan.

FTX Founder Sam Bankman-Fried leaves Manhattan Federal Court after a court appearance on June 15, 2023 in New York City.

The Right Man for The Job of Resolving FTX Bankruptcy

Ray's decision to join FTX, despite Bankman-Fried's concerns, demonstrates a shift in leadership focus from operations to debt resolution. John J. Ray III became CEO in November 2022 to lead the firm through bankruptcy. Ray, who had supervised Enron's collapse, called FTX his worst challenge shortly after taking over.

In the company's media release, he thanked various government agencies and the "customers and creditors of FTX for their patience throughout this process."

FTX is still a corporation, but its future is unknown. Early in 2023, Ray established a task committee to explore the possibility of reviving FTX.com, the crypto exchange. On Tuesday, FTX reported that it had recovered $14.5 billion to $16.3 billion in collapsed exchange assets.

FTX expects 98% of its creditors to get 118% of their permitted claims pending clearance from the United States Bankruptcy Court for the District Court of Delaware, per CNN.

Despite the asset seizure and mismanagement disclosures, rebuilding FTX has many of the same obstacles as any company with a tainted reputation. However, bitcoin trade dynamics may require special treatment.

Binance, a rival to FTX, considered buying the faltering exchange before its late 2022 collapse, according to Inquirer. However, the company's founder and former CEO, Changpeng Zhao, was sentenced to four months in prison for child sex abuse, drug trafficking, and terrorism funding on the network.

Despite these scandals, Binance remains the largest cryptocurrency exchange.