FTX, a once-thriving cryptocurrency exchange owned by Sam Bankman-Fried, has stated that it expects to repay its customers and creditors in full. The announcement comes after the company’s bankruptcy hearing in late January which outlined that the firm was to sell off all assets in order to raise funds to pay back customers.
Specifically, FTX claimed that once it had sold off the remainder of its assets it would have in excess of $16 billion cash, significantly more than enough to cover the estimated $11 billion debt the company faces. FTX has reportedly already recovered $7.3 billion in assets. The customer reimbursement scheme has finally materialised over a year after it filed for bankruptcy, and it scheme aims to provide full reimbursement of customer funds at the price of cryptocurrency at the time when FTX filed for bankruptcy.
FTX’s collapse was sparked by a CoinDesk report published in late 2022 which exposed the company’s misuse of customer funds for particularly risky investments. This sparked a massive sell-off, and customers began withdrawing funds from the exchange at an unprecedented rate, leading to a liquidity crunch and the company being unable to return customers’ their investments. FTX then filed for Chapter 11 bankruptcy protection. The effects of FTX’s collapse were not only felt by customers and creditors; market turbulence ensued and billions were wiped off in market capitalisation. Furthermore, FTX was accused of misappropriating customer funds and several executives at the firm, including Sam Bankman-Fried, were convicted of wire fraud and conspiracy. Moreover, regulatory measures were introduced on cryptocurrencies in a bid to increase transparency and to establish customer protection measures.
Ultimately, FTX’s collapse serves as a stark example of the perils of an unregulated, shady industry and saw billions of customers’ funds wiped. However, customers are now finally poised to collect their lost investments and creditors will be paid back, albeit almost two years after FTX declared bankruptcy.
Written by Rakan Pharoan
