Good news for people who lost money with FTX! The cryptocurrency company has received court approval to give back all the money to customers whose digital money was lost during the company's downfall almost two years ago.
This is an unusual win in bankruptcy cases and may also allow some shareholders to get a piece of around $1 billion that the government has taken from the company.
FTX Customers Set to Receive Full Refunds
On Monday (October 7), US Bankruptcy Judge John Dorsey said he plans to approve payments for FTX customers affected by Sam Bankman-Fried, the former CEO of FTX.
This approval is part of a plan created by advisers who took over FTX after it collapsed in November 2022. At that time, the cryptocurrency market was having serious problems, and many thought that customers would only get back a small amount of what they lost.
As the bankruptcy process continued, the situation for customers improved. In June, FTX reported that it had recovered $12.6 billion in assets, which could grow to as much as $16.5 billion as they continue to find and sell their assets, said CNBC.
One important asset they sold was their investment in a company called Anthropic, which works in artificial intelligence. Ken Pasquale, a lawyer for the creditors, told Judge Dorsey that FTX benefited from the rising prices in cryptocurrency over the past year, according to Bloomberg.
He mentioned that the company made smart deals with creditors and government officials to help customers get their money back. This good news raised hopes that some shareholders might also get paid, possibly from funds seized by the government.
This includes about $626 million that came from selling Robinhood stock, which was owned by Bankman-Fried and his co-founder, Gary Wang.
Some FTX Customers Unhappy with Cash Refunds Instead of Cryptocurrency
However, some customers are unhappy with how they will be paid back. According to Reuters, they will receive cash instead of cryptocurrency, which means they will miss out on any increase in the value of digital money since the company went bankrupt. They will also not get any money back for FTX's own token, FTT.
The cryptocurrency market is currently doing well, which shows that investors feel confident. This good trend has helped recover more assets, creating a positive atmosphere for investors.
In the past, only a few big companies in the U.S. that went bankrupt managed to pay back their creditors fully. A notable case was Hertz Global Holdings, which was able to pay back shareholders after used car prices went up significantly.
During the court hearing, bankruptcy attorney Andrew Dietderich confirmed that all debts would be paid back fully, along with interest. However, he made it clear that shareholders would not get any money unless the government agrees to return the seized funds.
A recent court filing revealed that shareholders might receive up to 18% of any returned confiscated assets, with a cap of $230 million.
Despite these developments, there hasn't been a final agreement with the Justice Department regarding the return of the seized funds. This means preferred shareholders might not receive any money under the current plan.
The recovery of cryptocurrency prices, especially Bitcoin, which has increased four times since late 2022, has significantly helped customers recover their money. During the court hearing, it was mentioned that the decision to start cash repayments came from realizing that FTX had much less cryptocurrency than expected.
CEO John J. Ray III decided to sell the digital assets that FTX had while tokens linked to Bankman-Fried, like Solana, became more valuable.
FTX hired Galaxy Digital Capital Management LP to help manage its remaining digital assets, which increased the funds available to pay customers back. However, payments won't happen immediately. Before customers can receive their money, FTX needs to set up a trust and hire a company to help distribute the funds.
