Why FTX's Plan To Refund 90% of Recovered Assets Doesn't Add Up To 90% of Customer Losses
Failed crypto exchange FTX has announced an updated plan for sending 90% of distributable funds—money it has recovered—to former customers in its bankruptcy proceedings, but that doesn't necessarily mean they will get back 90% of the money they lost.FTX is expected to file the proposal in a U.S. bankruptcy court by Dec. 16.
As the criminal trial of FTX founder and former Chief Executive Officer (CEO) Sam Bankman-Fried continues, a new plan has been put forward for former customers of the crypto exchange to get some of their money back in 2024. Under the plan offered by FTX's new management, which is headed by CEO and bankruptcy expert John J. Ray III, FTX customers will see 90% of every dollar of recovered assets.
To be clear, the 90% number refers to the funds FTX is able to gain access to, rather than total customer deposits at the time of the exchange's collapse. This doesn't necessarily mean customers will gain access to 90% of their assets that were left on the exchange. Rather, customers will gain access to 90% of the funds FTX is able to distribute to their creditors.
FTX and FTX US had an estimated $8.7 billion combined shortfall at the time the crypto firm filed for bankruptcy. Roughly $6.9 billion of that shortfall, including a Bahamas real-estate portfolio, had been recovered as of September.
The current FTX management continues to seek access to more funds for their creditors via methods such as clawbacks of customer money. For example, those who withdrew more than $250,000 from FTX in the nine days prior to the exchange's collapse will be able to pay a 15% fee on those funds to avoid potential clawback attempts.
According to Ikigai Asset Management founder and FTX creditor Travis Kling, this part of the
Read more on investopedia.com
