The bankrupt cryptocurrency exchange FTX has said it will be able to repay creditors the full $11bn (£8.8bn) it owes, as the boom-bust cycle repeats itself with a sharp increase in bitcoin prices.
John Ray III, who succeeded the disgraced Sam Bankman-Fried as the chief executive of FTX shortly after its collapse, 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 added.
The company has 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.
Legally speaking, FTX creditors – many of whom are simply former users of the platform – will get back the money they lost. However, in practical terms, they may feel less happy to have been effectively forced to sell their cryptocurrency holdings at the low prices of the time and to have missed out on recent gains.
FTX has also been helped by its large stake in the artificial intelligence startup Anthropic, formed by a group of former OpenAI staffers who quit after differences with the charismatic chief executive, Sam Altman. The exchange sold that stake in March this year, for $824m.
Bankman-Fried was jailed in March for 25 years over his role in the fraudulent collapse of the company.
During his trial he tried to argue that the expected repayment of all depositors should be a mitigating factor in his sentencing. If Ray had not intervened and frozen the company’s accounts, Bankman-Fried claimed, the company would have been able to trade its way out of the liquidity problems it faced at the time.
Judge Lewis Kaplan “rejected entirely” the claim, calling it “misleading, logically flawed and speculative”.
Kaplan added: “A thief who takes his loot to Las Vegas and successfully bets the stolen money isn’t entitled to a reduction of his sentence.”
The FTX plan still requires approval from the courts before funds can be distributed to former depositors.
Ray joined FTX shortly after the company declared bankruptcy, to the chagrin of Bankman-Fried, who expressed his desire for a replacement who intended to keep the company operating as a going concern.
Before joining FTX, Ray’s most prominent position had been overseeing the dismantling of Californian energy giant Enron. He was appointed as chair of the company after it emerged from its bankruptcy process in 2004, and spent five years unwinding its business, eventually returning more than half of creditors’ funds.
