FTX Gets Backlash Despite Planned Full Repayment Plus Interest

Crypto Market FTX Sam Bankman-Fried
Last updated:
Junior Content Creator
Junior Content Creator
Harvey Hunter
About Author

Harvey Hunter is a Junior Content Creator at Cryptonews.com. With a background in Computer Science, IT, and Mathematics, he seamlessly transitioned from tech geek to crypto journalist.

Last updated:
Why Trust Cryptonews
Cryptonews has covered the cryptocurrency industry topics since 2017, aiming to provide informative insights to our readers. Our journalists and analysts have extensive experience in market analysis and blockchain technologies. We strive to maintain high editorial standards, focusing on factual accuracy and balanced reporting across all areas - from cryptocurrencies and blockchain projects to industry events, products, and technological developments. Our ongoing presence in the industry reflects our commitment to delivering relevant information in the evolving world of digital assets. Read more about Cryptonews
Ad DisclosureWe believe in full transparency with our readers. Some of our content includes affiliate links, and we may earn a commission through these partnerships.

As everyone in the crypto space knows, cryptocurrency exchange FTX went bankrupt in November 2022 after a fraud-fueled collapse, leaving its users unable to access the cryptocurrency they held. FTX announced on May 7 that customers would be repaid their holdings plus interest two years after the initial collapse, but the proposed repayment plan has sparked a backlash among creditors.

FTX’s plan involves raising between $14.5 billion and $16.3 billion from selling off assets to repay creditors. Under this plan, creditors will receive $11.2 billion, resulting in a payout of up to 118% of the value of their FTX accounts as of November 2022, to compensate for the time value of their investments.

The funds to repay users will come from monetizing a collection of assets, including cryptocurrency held by the platform, proprietary investments held by Alameda or FTX Ventures businesses, and litigation claims. These assets include FTX’s 8% stake in AI startup Anthropic, which was sold to institutional investors for $884 million in March.

Creditors Furious Despite FTX Repayment Plan

FTX expects to collect enough cash to pay users 100% of what they’re owed, plus interest, but there’s a catch: they’re not getting their crypto back. Instead, they’ll receive US dollars based on the value of their accounts at the time of FTX’s bankruptcy in November 2022.

The cryptocurrency market experienced a crash in the immediate aftermath of the FTX bankruptcy, leaving it crippled. However, the market has since staged a major resurgence, with Bitcoin more than tripling in value from $17,000 to over $64,000.

This means that creditors will not benefit from Bitcoin’s higher prices, instead receiving a 9% interest rate. The backlash stems from the perception that this interest rate does not adequately compensate for the true value of the assets lost.

A Bloomberg report highlighted the plight of Arush Sehgal and Acaena Amoros Romero, whose life savings were tied up in FTX, standing to recoup only about $1 million, a quarter of what their account would be worth today.

Sehgal, a former member of the FTX creditor committee, has been critical of the restructuring advisors’ handling of the case. “A hundred cents on the dollar doesn’t really mean much to me,” he said, underscoring the frustration among creditors.

When Will Repayments Be Issued?

While FTX has indicated that repayments could be issued later this year, resistance from creditors may impede the process.

Over 80 creditors have filed letters with the bankruptcy court, criticizing decisions made by FTX CEO John Ray, particularly the methodology used to determine account values.

Sehgal estimates that over 1,500 creditors share his views, as evidenced by the response on FTX.vote, a platform he created to mobilize opposition to the plan.

In January, a group of creditors sued FTX in bankruptcy court, arguing that their crypto was not a property that FTX could sell.

The judge overseeing the FTX Chapter 11 case will likely need to resolve this lawsuit before any payouts can be made to customers. The outcome of this legal battle will determine the fate of the FTX repayment plan and the financial recovery for its former customers.

The plan’s success in satisfying creditors ultimately hinges on resolving this legal dispute and the overall direction of the cryptocurrency industry.

More Articles

DeFi News
Bitget Eyes Lithuania for EU Regional Hub Amid MiCA Compliance Plans
Hassan Shittu
Hassan Shittu
2024-12-11 14:18:16
Bitcoin News
Russia Follows in U.S. Footsteps, State Deputy Pushes For Strategic Bitcoin Reserve
Harvey Hunter
Harvey Hunter
2024-12-11 13:14:30
Crypto News in numbers
editors
Authors List + 66 More
2M+
Active Monthly Users Around the World
250+
Guides and Reviews Articles
8
Years on the Market
70
International Team Authors