FTX customers to receive full repayment, but based on old market prices
FTX, the cryptocurrency exchange that went bankrupt in November 2022 after its founder Sam Bankman-Fried was accused of fraud, has announced that it expects to fully repay its customers, according to a court hearing on Wednesday.
However, the customers who lost their assets on FTX may not be satisfied with the repayment plan, as it is based on the market prices at the time of the exchange’s collapse, when the cryptocurrency market was in a deep slump.
According to FTX’s lawyer Andrew Dietderich, the repayment process will require customers to submit proof of their holdings and losses on FTX, which will be verified by restructuring advisers. The exchange has given up on its plans to resume its operations, and is focusing on making its former clients whole, he said.
But some customers are unhappy with the proposed date of the bankruptcy, which was preliminarily approved by U.S. Bankruptcy Judge John Dorsey. The date is set to be around early November 2022, when the price of bitcoin was around $20,500, down from its peak of over $60,000 in April 2022.
Since then, bitcoin has recovered to more than $43,000 as of Thursday, up 110% from its low point. This means that the customers who lost bitcoin on FTX will receive less than half of their current value.
“Many of those claims are premised upon currencies which declined dramatically in value in that tumultuous period leading up to the petition date,” said Kris Hansen, the lawyer representing the FTX Creditor Committee, during the hearing.
FTX’s native token FTT, which was used to pay fees and access discounts on the exchange, also saw a spike in price after the news of the repayment plan, but it quickly reversed and dropped by 15% on Wednesday. FTT was trading at around $2.15, down from its all-time high of over $10 in September 2022.
FTX was one of the largest and most popular cryptocurrency exchanges in the world, with over 15 million users and a daily trading volume of over $10 billion. It offered a variety of products, such as futures, options, leveraged tokens, and prediction markets.
However, the exchange came under scrutiny in October 2022, when the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Bankman-Fried, alleging that he had misappropriated customer funds and manipulated the market. The SEC claimed that Bankman-Fried had transferred over $1 billion from FTX to his personal accounts, and used it to trade on other platforms and inflate the prices of FTT and other tokens.
Bankman-Fried denied the allegations, but he was arrested in November 2022 and later found guilty of fraud and money laundering. He is currently facing a prison sentence of up to 20 years and a fine of up to $5 billion.
The collapse of FTX was one of the biggest scandals in the history of the cryptocurrency industry, and it left millions of customers in limbo, wondering if they would ever get their money back. The announcement of the repayment plan may offer some hope, but it also raises questions about the fairness and feasibility of the process.
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