FTX Creditors Set for Cash Windfall Beyond 100% of Claims

A new reorganization plan filed Tuesday night proposes that nearly all FTX account holders will be repaid in full for their claims. They may even receive additional cash on top of that amount.

This unexpected windfall is possible because FTX said it recovered billions more dollars than initially anticipated to cover customer losses from its Nov. 2022 collapse.

FTX revealed it amassed roughly $15b, primarily from selling venture capital investments made by the exchange and its affiliate Alameda Research. This amount is enough to fully repay nearly all creditors with claims of $50,000 or less (representing 98% of creditors). The remaining creditors will also receive a significant recovery, with a minimum payout of 118% of their claims.

The defunct exchange’s proposed reorganization plan goes beyond simply repaying creditors.

The court filing reveals it also includes potential additional compensation to account for the time value of money lost since FTX’s bankruptcy. This means customers won’t just get their money back, they may also receive interest on it.

Justice for FTX Victims? Beyond Settling Claims, Potential Bonus Awaits

This payout to over 2m customers is a rare occurrence in typical US bankruptcy cases, where creditors often receive only a fraction of what they’re owed.

Some creditors, depending on their claim type, could see a return of up to 142% – meaning they get back more than they originally lost.

FTX’s payout plan is significantly better than initial expectations. Back in October, the company anticipated returning just 90% of customer funds. This outlook improved in January when CEO John Ray III told the court he expected full repayment for customers.

FTX is expected to have a significant surplus of cash ($16.3b) after selling all its assets, according to the filing. This is more than enough to cover what it owes to customers and other non-government lenders (about $11.2b).

“The debtors and their stakeholders have had time to explore strategic options and runway to monetize illiquid and volatile investments gradually over time,” the filing said.

FTX Asset Fire Sale Fuels Repayment Plan for Creditors

FTX had been aggressively selling off its assets to raise the funds needed to repay creditors.

This includes investments both FTX and its affiliate made, such as an 8% stake in AI startup Anthropic. That stake was sold to institutional investors for a total of $884m back in March.

The proposed distribution plan remains contingent upon formal approval from the Delaware bankruptcy court. Even if approved, a disbursement of funds to creditors and account holders is likely a few months away, as FTX navigates the concluding stages of its bankruptcy proceedings.