Customers of the insolvent cryptocurrency exchange FTX and its U.S. subsidiary, FTX.US, may potentially recover over 90% of their assets by the end of the second quarter of 2024, following a proposed settlement reached between FTX's debtors and creditors. FTX Debtors revealed on October 17 that they had made significant progress in their Chapter 11 bankruptcy case, having engaged in extensive discussions with various parties, including the Unsecured Creditors Committee, Non-U.S. Customer Committee, and class action plaintiffs, regarding disputes related to customer assets.
The details of the proposed settlement were submitted to the U.S. Bankruptcy Court in Delaware on October 16, but formal court approval is still pending and expected to be sought before December 16. The settlement includes a concept known as a "shortfall claim," which anticipates that customers of FTX.com and FTX.US combined will receive 90% of the distributable assets. This equates to around $8.9 billion for FTX.com and approximately $166 million for FTX.US. If approved by the bankruptcy court, it's anticipated that the distribution of funds will be completed by the end of Q2 2024.
The restructuring plan involves segregating assets into three pools, designed for the benefit of FTX.com customers, U.S. customers, and a general pool of other assets, with only the first two groups covered by the shortfall claim. It is noted, however, that both customer groups are not expected to receive full reimbursements, with FTX.com customers likely experiencing a larger proportion of their losses covered. Additionally, those customers who withdrew over $250,000 from the exchange within nine days of its bankruptcy would see their claims reduced by 15% as part of the proposed settlement.
Notably, FTX Debtors also stated that customers with priority settlement amounts under $250,000, withdrawn within nine days, would not be subject to claim reductions. The settlement plan, however, may exclude any insiders, affiliates, or customers with knowledge of the mishandling or misappropriation of customer deposits and company funds. Former FTX CEO Sam Bankman-Fried is currently in the midst of a fraud trial, related to the events leading up to FTX's bankruptcy in November of the previous year.
