AFTER more than two years of hand-wringing, creditors of bankrupt crypto exchange FTX are heaving a sigh of relief as the trading platform’s estate starts paying cash back to creditors this week.
FTX reportedly owed creditors about US$11.2 billion (S$15 billion) but has between US$14.5 billion and US$16.3 billion to distribute to customers and non-governmental creditors after it sells all its assets.
The creditors included big boys like Tiger Global Management, Temasek, SoftBank Group, BlackRock and Sequoia and high-profile celebrities like football player Tom Brady, basketball player Shaquille O’Neal and model Gisele Bündchen.
On Tuesday (Feb 18), the liquidation estate said customers should start to see the funds within one to three business days. The next distribution to creditors is expected to take place on Apr 11, and the following one – on May 30. The initial distributions are being made through crypto companies BitGo and Kraken, Bloomberg reported.
FTX hit the headlines when it imploded in November 2022 after freezing all withdrawals by customers. The collapse plunged the crypto market into its darkest days and brought billions of losses to customers using the exchange and investors who had bet on it. Its whizz kid founder Sam Bankman-Fried – at the time celebrated as the poster boy for crypto – was later arrested and convicted of fraud, conspiracy, and money laundering, and jailed for 25 years and ordered to forfeit US$11 billion.
Soon after FTX collapsed, Temasek said it would write off its US$275 million investment “irrespective of the outcome of FTX’s bankruptcy protection filing”, which as it turned out has been quite positive for Temasek and all creditors. The state investor had held a 1.5 per cent stake in FTX and the investment constituted 0.09 per cent of its S$403 billion portfolio as at end-March 2022.
In its bankruptcy filing, FTX had proposed that the payouts be based on what accounts were worth in late 2022 – when the market was down, which drew the ire of some creditors. Under the re-organisation plan, customers whose claims amount to US$50,000 or less will get about 118 per cent of their allowed claim. About 98 per cent of creditors will receive this compensation.
But cryptocurrencies have soared since then, which means creditors lose out with repayments pegged to 2022 prices.
In bankruptcy proceedings, customers and other creditors get paid before investors. As the value of assets recovery exceeds FTX’s debt, Robson Lee, a partner at law firm Kennedys Legal Solutions, told The Straits Times that investors like Temasek and Sequoia are likely to get back some money.
