The saga of the bankrupt crypto exchange FTX took a fresh turn this week, with some welcome news for creditors.
The Guardian reported that John Ray III, a turnaround specialist who succeeded the disgraced Sam Bankman-Fried as the chief executive of FTX shortly after its collapse, has confirmed that once FTX has sold off remaining assets, it will have more than the amount required to pay off its creditors.
FTX said it will be able to repay creditors the full $11bn (£8.8bn) it owes.
FTX Chapter 11
FTX in January had abandoned efforts to restart its crypto exchange, instead opting to liquidate all assets and return funds to customers.
FTX had collapsed into Chapter 11 in November 2022 after a multi billion dollar hole was found in its balance sheet.
At the time of filing for Chapter 11, Bankman-Fried stepped down and was replaced by new CEO John J. Ray III.
Ray is an experienced operator, having overseen some of the biggest bankruptcies in corporate history, including the collapse of the energy giant Enron.
In total Ray has 40 years of experience in restructuring companies, and he had promised to work with federal regulators to investigate FTX founder Bankman-Fried.
And he had pulled no punches in his initial assessment of FTX and Bankman-Fried, saying he had never seen anything as bad as FTX.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” Ray wrote in a filing with the Delaware bankruptcy court.
“From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.”
John Ray has previously said his top priority was the recovery of assets to repay FTX customers, and last year he once again slammed Sam Bankman-Fried in a debtors report, and said the collapse of FTX was due to “hubris, incompetence, and greed”.
Asset recovery
John Ray said that once the exchange had sold off its remaining assets, it might have more than $16bn – well in excess of its debts.
“We are pleased to be in a position to propose a chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors,” the bankruptcy expert was quoted as saying by the Guardian newspaper.
FTX has reportedly been helped by the fact its debts are denominated in dollar terms, while many of its assets are highly speculative digital commodities and stakes in high-growth startups. At the time of FTX’s collapse, in November 2022, one bitcoin was worth about $20,000; now it sells for more than triple that.
The Guardian also noted that FTX has been helped by its large stake in the artificial intelligence startup Anthropic.
The exchange reportedly sold that stake in March this year, for $824m.
On 28 March 2024 Bankman-Fried had been sentenced to 25 years in prison for masterminding a $8 billion fraud at the now-bankrupt FTX cryptocurrency exchange he had founded.
In April Bankman-Fried launched his appeal against that prison sentence.
The Guardian noted that the FTX recovery plan still requires approval from the courts before funds can be distributed to former depositors.
