FTX Crypto Fraud Victims to Receive Full Refunds with Interest

FTX Creditors to Receive Full Compensation and Interest, Bankruptcy Lawyers Say

Majority of Victims to Recoup Funds

In a surprising turn of events, bankruptcy lawyers representing customers affected by the catastrophic collapse of cryptocurrency exchange FTX in November 2022 have announced that the vast majority of victims will not only receive their money back but also earn interest on their investments. This news comes nearly a year and a half after the exchange’s dramatic downfall and six months after the conviction of its co-founder and former CEO, Sam Bankman-Fried (SBF).

SBF’s Conviction and Appeal

SBF was found guilty on seven counts related to fraud, conspiracy, and money laundering, with approximately $8 billion of customers’ funds missing. In March, he was sentenced to 25 years in prison and ordered to pay $11 billion in forfeiture. However, the crypto mogul filed an appeal last month, which could potentially last for years.

Restructuring Efforts and Asset Recovery

Following FTX’s bankruptcy filing in late 2022, U.S. attorney John J. Ray III took over as CEO and “chief restructuring officer,” tasked with overseeing the company’s reorganization. Ray and his team worked diligently to track down the missing funds, which had been invested in various assets, including real estate, political donations, and venture capital investments. One notable investment was a $500 million stake in AI company Anthropic, which the FTX estate successfully sold earlier this year for $884 million, just before the generative AI boom.

Creditors to Receive Full Compensation and Interest

Despite initial doubts about the possibility of investors recouping their losses, recent progress in clawing back cash from various investments and executives has led to a positive outcome. According to a press release issued by the FTX estate, 98% of FTX creditors will receive 118% of the value of their FTX-stored assets in cash, while the remaining creditors will receive 100% plus “billions in compensation for the time value of their investments.”

The FTX estate expects to distribute between $14.5 and $16.3 billion in cash, which includes assets currently under the control of various entities, such as chapter 11 debtors, liquidators, the Securities Commission of The Bahamas, and the United States Department of Justice, among others.

Resolving Disputes and Moving Forward

The reorganization plan, which requires approval from the relevant bankruptcy court, aims to resolve all ongoing disputes with stakeholders and government entities without the need for costly and lengthy litigation. However, it is important to note that creditors will not benefit from the recent Bitcoin boom that has emerged in the crypto industry since FTX’s collapse, as the exchange had a significant shortfall in Bitcoin and Ethereum at the time of its bankruptcy filing.