FTX Announces Plan to Fully Repay Nearly All Customers

After two years of waiting, it appears FTX customers are going to get something after the exchange’s collapse.

Photo for the Article - FTX Announces Plan to Fully Repay Nearly All Customers

FTX, formerly a prominent crypto exchange, collapsed nearly two years ago. However, it’s now unveiling plans to reimburse nearly all its customers, with some set to receive more than their original claims.

While former CEO Sam Bankman-Fried’s fraudulent actions resulted in his imprisonment, the exchange aims to fully repay creditors, pending court endorsement.

FTX to Refund Customers

As indicated by a recent court filing, nearly all FTX customers are set to receive full refunds, and potentially more. 

The exchange’s reorganization plan under Chapter 11 of the bankruptcy code highlights debts amounting to roughly $11.2 billion, contrasted with available funds ranging between $14.5 billion and $16.3 billion allocated for distribution to creditors.

Moreover, the plan revolves around settlements with key stakeholders, addressing $24 billion in Internal Revenue Service (IRS) claims through cash payments and subordinated claims. Agreements are also proposed to subordinate post-commencement tax claims and channel recoveries into a restitution fund.

Photo for the Article - FTX Announces Plan to Fully Repay Nearly All Customers

Additionally, a potential deal with the Department of Justice could distribute over $1.2 billion in forfeiture proceeds to customers and creditors. Previous settlements prioritize customers in the plan and reconcile claims with FTX Digital Markets Ltd., alongside agreements with BlockFi, FTX’s largest creditor.

Read: What Happened? BlockFi Files for Bankruptcy Amid FTX Crypto Contagion

However, approval from the bankruptcy court is still pending for the reorganization plan, which is expected to provide relief to FTX customers whose funds have been inaccessible since the exchange filed for bankruptcy protection in November 2022.

Repayment funds were sourced from asset sales and venture investments, mainly held by FTX and Alameda Research, the principal entities involved in the collapse.

“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… I want to thank all the customers and creditors of FTX for their patience throughout this process,” John J. Ray III, FTX Chief Executive Officer and Chief Restructuring Officer, said in a statement.

Consequently, FTX anticipates that if its plan gets approval from the United States Bankruptcy Court for the District Court of Delaware, approximately 98 percent of its creditors will receive about 118 percent of the amount of their allowed claims.

The bankruptcy court is scheduled to conduct a hearing regarding the distribution of FTX assets on June 25.

What happened to the ones involved with the collapse?

In 2022, Bankman-Fried, the key person to the whole fiasco, was apprehended and brought to the United States, where he pleaded not guilty and was initially placed under house arrest. 

Subsequently, following accusations of witness intimidation, he was detained pending trial. After a six-week trial in late 2023, he was convicted and sentenced to 25 years in prison for all seven criminal charges brought against him.

Read: FTX Founder Sam Bankman-Fried Convicted in Landmark Fraud Case

On the other hand, Caroline Ellison, ex-CEO of Alameda and Sam Bankman-Fried’s former girlfriend, was initially facing up to 110 years in prison. However, she opted to cooperate with the federal government and pleaded guilty to federal fraud charges in a deal. She testified against Bankman-Fried in court and confessed to fraud and conspiracy, accusing him of instructing her to hide Alameda’s debts to FTX and making risky investments.

In December, it was noted that the charges against her, which included wire fraud, commodities fraud, securities fraud, and money laundering, could have resulted in a lengthy prison term, but her plea agreement has temporarily spared her from criminal charges. At the time, the duration of her imprisonment will only be determined after she has completed her cooperation—however, as of this writing, there is no update regarding her sentence.

As for Gary Wang, co-founder of FTX, and Nishad Singh, former director of engineering at FTX, the final sentences for both remain undetermined.

Wang admitted guilt to four criminal counts involving customer fraud but cooperated with prosecutors in hopes of receiving a reduced sentence. He confessed to modifying the code to enable Alameda Research to access funds from FTX customers without their knowledge. While prosecutors may recommend leniency for Wang’s cooperation, the final sentence remains uncertain due to the case’s high-profile nature.

Singh pleaded guilty to five criminal fraud charges, expressing remorse for his actions. He admitted to being aware of Alameda Research’s unauthorized borrowing of FTX customer funds. Singh’s guilty plea encompassed charges including wire fraud, conspiracy, money laundering, and campaign finance law violations.

FTX Collapse Timeline as Covered by BitPinas

  • November 2022
    • Binance CEO Changpeng Zhao (CZ) announced that it is set to liquidate its own FTX Tokens ($FTT) after a Coindesk article revealed that Alameda, FTX’s sister company, rests largely on FTT and not on any independent asset. 
    • CZ revealed that his company has signed a “letter of intent” to acquire FTX Exchange. 
    • FTT went into freefall and lost most of its value (about 80%).
    • CZ denied that there is any kind of “conspiracy” against FTX, or that he’s in a “fight” with its CEO Sam Bankman-Fried. 
    • Binance backed out of its deal to purchase FTX because “the issues are beyond our control or ability to help.”
  • December 2022
    • BlockFi files for Chapter 11 bankruptcy, weeks after the collapse of FTX, which previously signed a term sheet to provide credit to the embattled crypto lender last June. 
    • The Bangko Sentral ng Pilipinas (BSP) has confirmed that it has asked locally licensed cryptocurrency exchanges about their exposure to FTX’s downfall, exchanges then clarified that none was affected by the downfall. 
    • SBF was arrested by Bahamian authorities concerning the collapse of FTX.
    • After his arrest, he was charged by the U.S. Attorney’s Office and the US SEC for wire fraud, conspiracy to commit money laundering, and campaign finance violations.
    • SBF’s first appearance in court has made him request a $250 million bail with bond requirements. Aside from him, two other executives from his previous crypto empire, Caroline Ellison, the former CEO of Alameda Research, and FTX co-founder Gary Wang, have pleaded guilty to charges tied to FTX’s collapse.
  • January 2023
    • Bankman-Fried pleaded not guilty through his lawyer on eight different counts of charges.
  • October 2023
    • Bankman-Fried stands trial for cryptocurrency fraud charges, facing allegations of embezzlement and deception.
  • November 2023
    • The former FTX CEO was convicted on seven counts of fraud after a jury found him guilty in a case described by U.S. Attorney Damian Williams as “one of the biggest financial frauds in U.S. history.”

This article is published on BitPinas: Nearly 2 Years After Collapse, FTX to Return Customer Funds


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