FTX Customers to Recover 118% of Losses, But BTC up 376% Since Exchange Collapsed
FTX customers will be repaid in full. Photo by Christian Dubovan on Unsplash.
Key Takeaways
- FTX’s amended restructuring plan will see creditors receive at least 118% of the value of lost assets in November 2022.
- But since then, most cryptocurrencies have more than doubled in price.
- As a result, FTX customers are worse than they would have been if they were repaid in crypto.
Having sold the majority of the bankrupt company’s assets, FTX’s administrators have filed an amended restructuring plan that could see 98% of creditors receive 118% of what they are owed.
The figure is better than many expected. It is, however, still well below what assets held on the platform in November 2022 would be worth today.
FTX Customers Miss Out on Bull Market
FTX’s insolvency proceedings said that creditors would be repaid in fiat based on the value of their assets at 15:00 UTC on November 11, 2022.
Back then, Bitcoin was worth around $17,000 and Ethereum was about $1,300. Today, BTC is worth more than $62,000 and ETH more than $3,000.
In other words, BTC worth $1,000 at the time FTX claims are valued at would be worth more than $3,760 today. The equivalent ETH investment is now worth $2,310. Indeed, some altcoins have climbed even more than that.
Compared to crypto market gains in the last year and a half, FTX’s pledge to refund customers the dollar value of their assets at the bottom of the bear market is underwhelming.
But at the same time, if cryptocurrency prices hadn’t risen creditors would be even worse off.
How FTX Recouped Its Losses
The FTX estate reached a deal to liquidate its assets in April last year, appointing Galaxy Digital to oversee the sales. However, the first tranche of liquidations didn’t occur until October. The firm has been offloading cryptocurrency bit by bit since then.
After selling off its cryptocurrency holding, often at a significant market discount, FTX filed an amended restructuring plan on Tuesday, May 7.
The filing states that the bankrupt firm has between $14.5 billion and $16.3 billion to distribute to creditors – more than enough to cover its $11.2 billion of debt.
Why Not Crypto Repayments?
Many FTX customers would rather receive their reimbursement in crypto. However, that was unlikely to ever happen, given how the exchange collapsed. After all, if FTX had the crypto it owed back in 2022, the entire crisis might not have happened.
Some disgruntled creditors have pointed to the Mt. Gox bankruptcy, which pursued a different path by opting to reimburse users with Bitcoin and Bitcoin Cash.
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Mt. Gox users who opted for crypto disbursements won’t receive the full amount of Bitcoin they held on the platform. However, they are still much better off than they would be if their claims were priced in the fiat value of BTC when the exchange collapsed in 2014.
Compared to Mt. Gox, FTX offered a much wider range of cryptocurrencies. Distributing the company’s crypto holdings like-for-like while fairly sharing the cost of CEO Sam Bankman-Fried’s embezzlement would have been a complex undertaking. It is likely the largest and most influential creditors would have little appetite it.
