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Clients of the now-defunct cryptocurrency exchange FTX are set to recover their funds, and a little more, following its sudden shut down in 2022. The company’s bankruptcy attorneys have confirmed that the customers will get back not only the full amount of their lost investment, but also additional interest.
This is part of the ongoing process to reimburse an estimated $8 billion in client assets which vanished when FTX abruptly closed down, causing a panic in the cryptocurrency industry. As per the plan submitted to the federal bankruptcy court in Delaware, the majority of FTX’s debtors, including several hundred thousands of regular investors, would receive cash repayments equal to 118 percent of the assets they had with the firm.
FTX’s lawyers have collected these funds over a period of 17 months since the company’s downfall. However, the repayment is based on the value of the holdings at the time of the firm’s bankruptcy in November 2022, and therefore, a recent surge in the crypto market value will not benefit the customers. Consequently, a customer who lost one Bitcoin due to the collapse would get less than $20,000, even though the current value of Bitcoin has soared above $60,000.
The repayment process will begin in the coming months, pending approval from John T. Dorsey, the federal judge overseeing FTX’s bankruptcy. The consensus among crypto observers is that it seemed improbable that clients would recover their money following the FTX breakdown. Prior to its collapse, FTX was a thriving marketplace for buying and selling digital currencies, managing billions of dollars in crypto.
Following the collapse, FTX’s CEO, Sam Bankman-Fried, resigned and was later imprisoned for 25 years after being found guilty of a fraud scheme involving billions of dollars in customer funds. His successor, John J. Ray III, a specialist in corporate restructuring, has led the meticulous effort to recover the lost assets, with some successful investments by the previous CEO helping in the recovery process.
For example, FTX had invested $500 million in AI company Anthropic in 2021, with share prices later soaring. Around two-thirds of FTX’s stake was sold for $884 million by Ray’s team. FTX also managed to recover over $400 million from Modulo Capital, a hedge fund that was funded by Bankman-Fried. Lawsuits were also filed to retrieve funds from former executives and Bankman-Fried’s family members.
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