BANKRUPT word made of letters seen in front and blurred FTX logo seen on display. Source: Ascannio - stock.adobe.com

Key Takeaways:

FTX’s restructuring plan proposes full compensation for 98% of its creditors, with potential payments up to 118% of their claims, pending approval from the Delaware Bankruptcy Court.
The restructuring includes significant financial recoveries through asset liquidations and settlements, including a $450 million settlement with Voyager Digital and the sale of Anthropic shares, totaling an additional $884 million.
Despite the restructuring efforts, FTX confirms it will not reopen its cryptocurrency exchange platform, focusing instead on compensating creditors and managing its remaining assets.

FTX’s restructuring efforts are set to fully compensate nearly all its creditors, with a significant portion potentially receiving more than their initial claims, amidst ongoing legal proceedings and a recovering cryptocurrency market.

Under the new proposal, 98% of FTX’s creditors are slated to receive up to 118% of their allowed claims.

FTX plans to pay billions more to creditors for compensation https://t.co/ctfG3bdNFN
— The Block (@TheBlock__) May 8, 2024

The remaining creditors will not only have their claims fully satisfied but will also receive “billions in compensation for the time value of their investments,” according to a statement from the bankrupt crypto exchange.

This plan, however, remains contingent on approval from the Delaware Bankruptcy Court.

FTX’s CEO and chief restructuring officer, John J. Ray III, expressed satisfaction with the proposed Chapter 11 plan, highlighting its aim to return 100% of bankruptcy claim amounts plus interest to non-governmental creditors.

The FTX Debtors today filed their anticipated amended Plan of Reorganization and accompanying Disclosure Statement with the U.S. Bankruptcy Court. Read about it here https://t.co/EGmlVdWOaS below: pic.twitter.com/bwwvRolX21
— FTX (@FTX_Official) May 7, 2024

This plan marks a notable shift from the previous approach, which reimbursed creditors based on the asset values at the time of FTX’s bankruptcy filing in November 2022.

The value of the crypto assets collected and converted into cash for distribution ranges from approximately $14.5 to $16.3 billion, reflective of the significant rise in Bitcoin and other crypto markets since the bankruptcy.

The full repayment plan, if ratified by the bankruptcy court, would be executed within 60 days from the plan’s effective date.

However, only creditors with claims of $50,000 or less are eligible for the 118% recovery rate.

In addition to these developments, FTX has also been involved in significant transactions to manage its debts, including a $450 million settlement with Voyager Digital and the sale of its shares in the AI firm Anthropic in March, which raised $884 million.

As part of its ongoing restructuring, FTX confirmed earlier this year that it would not be relaunching its cryptocurrency exchange platform, once among the largest by trading volume.

This decision comes as the company continues to navigate the aftermath of a collapse that left an $8 billion deficit in its finances, triggered by mismanagement and market volatility.