FTX, the cryptocurrency exchange that collapsed in 2022, has unveiled a new proposal to compensate victims, promising to repay all creditor claims along with additional compensation for the time value of their investments. However, some analysts argue that the proposal may fall short of expectations.
In a statement released on May 7, FTX outlined its plan, which is subject to approval by the United States Bankruptcy Court for the District of Delaware. The proposal aims to repay all creditor claims, with creditors holding claims below $50,000 eligible for a 118% recovery.
FTX’s plan reimburses creditors based on the value of their assets at the time of the exchange’s bankruptcy in November 2022, rather than at current market prices. This decision has sparked debate, as crypto markets have surged since the collapse, with Bitcoin rising by nearly 280%.
FTX CEO and chief restructuring officer John J. Ray III expressed satisfaction with the proposed plan, highlighting the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors. FTX estimates that creditors will receive between $14.5 and $16.3 billion in total.
Despite the proposed compensation, industry pundits like Mike Belshe, CEO of BitGo, expressed dissatisfaction, noting that victims may not recover their funds equivalent to current market prices. The sentiment reflects the challenge of balancing bankruptcy procedures with victims’ expectations.
FTX has undertaken various efforts to recover from the collapse, including the sale of shares in artificial intelligence firm Anthropic for $884 million in March. However, FTX confirmed in January that its restructuring plans would not include a relaunch of the cryptocurrency exchange.
FTX’s compensation proposal represents a significant step toward addressing the fallout from its collapse in 2022. While it promises full repayment of creditor claims, concerns remain regarding the valuation of assets at the time of the collapse and the overall satisfaction of victims.
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