FTX Repayment Plan Approved: US Bankruptcy Court Judge John Dorsey Orders Compensation in Cash Plus Interest

US Bankruptcy Court Judge John Dorsey greenlit now-defunct crypto exchange FTX's repayment plan for customers on Monday.

Bankrupt crypto exchange FTX’s plan to repay customers has been approved by a US bankruptcy court judge, allowing the company to begin returning funds to customers who lost money when FTX collapsed.

The plan, approved by Judge John Dorsey on Monday, will see FTX bankruptcy estate pay crypto customers in cash plus interest, according to Reuters. The funds will come from the $16.5 billion in assets recovered by the Department of Justice from the company formerly helmed by ex-CEO Sam Bankman-Fried.

FTX will pay 98% of its customers with crypto holdings of $50,000 or less within 60 days of the plan’s enforcement. However, the plan's effective date has yet to be determined.

While Chapter 11 usually protects bankrupt individuals or businesses from creditors, who typically receive nothing during these proceedings, the court has set aside up to $230 million from the funds seized by the DOJ to compensate them.

During FTX’s bankruptcy filing in 2022, the exchange estimated that it had between $14.7 billion and $16.5 billion to repay its creditors, which would be enough for them to recoup at least 118% of the value of their shares.

The approval of FTX’s customer repayment plan comes after the Commodity Futures Trading Commission, the Internal Revenue Service and other relevant agencies agreed to allow FTX to repay its customers first before settling its fines and taxes owed.

Liquidators in the Bahamas also agreed in December 2023 to let the US bankruptcy case take precedence over their own liquidation process.

“This is a model case for how to deal with a very complex Chapter 11 bankruptcy proceeding,” Dorsey said of the recent developments.

FTT Drops Despite Approval of Customer Repayments

The approval of FTX’s customer repayment plan appears to have had a negative impact on the price of the FTX Token (FTT), which has already lost 97% of its value from its all-time high of $85.02 three years ago and over 90% of its price in November 2022 leading to its bankruptcy filing.

Despite the token’s poor performance, which saw it trading at a low of $0.80 in December 2022, FTT has experienced a 102% climb over the year to its current price of around $2.40.

The token’s price also increased by 34% within the past 24 hours as its values spiraled up from a low of $2.04 to a high of $3.10. The surge in token values came as over $326.36 million worth of FTT moved across DeFi wallet addresses, indicating a large amount of activity on the network.

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