An unprecedented saga will soon be punctuated by an unprecedented epilogue: FTX confirms it has “found” the money to repay nearly all of its two million plus customers (and creditors alike) two years after the notorious cryptocurrency exchange’s implosion — with interest.
According to court documents, the debt in question amounts to approximately US$11.2 billion (AU$17 billion). But as revealed by current FTX CEO John Ray III, who succeeded incarcerated founder Sam Bankman-Fried, once the operation has sold off its remaining assets, it’ll have over US$16 billion (AU$24 billion) to distribute among the aggrieved parties.
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And it’s largely thanks to the monster rallies of digital tokens such as Solana and Bitcoin — the latter having climbed by over +270% since FTX went bust — as well as a considerable stake in artificial intelligence startup Anthropic (founded by former OpenAI staffers).
Earlier this week, the chief executive’s restructuring team filed the latest draft bankruptcy plan and disclosure statement, which estimate that both customers and digital asset loan creditors will recover “between 118% and 142% of their Petition Date claim values.”
“We are pleased to be in a position to propose a Chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors,” John Ray, a bankruptcy litigator renowned for overseeing the liquidation of Enron, said in his prepared statement.
“In any bankruptcy, this is just an unbelievable result.”
Safe to say, this entire rollercoaster ride has been wild to witness (let alone be directly involved with). For those of you who’ve only just tuned in, here’s a brief summary of what’s unfolded so far:
- FTX was founded in 2019 and achieves a multi-billion-dollar valuation in relatively no time (US$32 billion or just under AU$50 billion at its peak circa January 2022).
- Binance CEO Changpeng Zhao, commonly referred to as CZ, acquires a 20% stake in FTX. At this stage, CZ and Sam Bankman-Fried are on friendly terms.
- Due to a falling out, CZ cashes out around mid-2021 but takes FTX’s native token FTT instead of cash
- After months of back and forth between the friends turned bitter rivals — the bulk of which involves SBF’s considerable political sway and regulatory crackdowns — CZ dumps US$580 million (AU$880 million) worth of FTT, causing widespread panic.
- FTX encounters what’s known as a “liquidity crunch” — it struggles to accommodate the sudden demand for withdrawals from investors (though as we now know, they weren’t insolvent).
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- Sam Bankman-Fried loses both billionaire status and 94% of his net worth in a single day, later sliding even further from a peak of US$16 billion (AU$24 billion) to owing around US$600 million (AU$910 million).
- Around the same time, it’s revealed that SBF has allegedly been misappropriating billions of FTX customers’ dollars to partner firm Alameda Research — helmed by ex-girlfriend and one of his polyamorous partners Caroline Ellison — where they were regularly making bets he couldn’t cover.
- Just to add some more flavour, Caroline Ellison has publicly admitted to regular amphetamine use via Twitter, which she claims “makes you appreciate how dumb a lot of normal, non-medicated human experience is.”
- FTX goes bust in late 2022 with about US$8 billion (AU$12 billion) worth of cash and crypto on its platform.
- Bankman-Fried is replaced as FTX’s CEO by John Ray III, who noted, “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”
- Bankman-Fried is arrested by local authorities in the Bahamas.
The bankruptcy court is scheduled to hold a hearing on the distribution of FTX assets on June 25th, 2024. As for the matter of Sam Bankman-Fried, the disgraced MIT graduate, former billionaire, “crypto wunderkind,” and “radical altruist” is currently serving a 25-year prison sentence for fraud. Which won’t be mitigated despite the recent development.
“A thief who takes his loot to Las Vegas and successfully bets the stolen money isn’t entitled to a reduction of his sentence,” explained Judge Lewis Kaplan.
