- Insolvent FTX pledges full repayment to creditors amid bitcoin surge
- New CEO John Ray III expects to amass $16 billion
- Court approval awaited for FTX creditor reimbursement plan
As the boom-and-bust cycle repeats, a sharp increase in bitcoin prices prompts the insolvent cryptocurrency exchange FTX to declare that it will be able to repay its creditors the total $11 billion (£8.8 billion) it owes.
Following Sam Bankman-Fried’s scandalous demise, John Ray III assumed the role of FTX’s chief executive officer. He estimated that after liquidating the exchange’s residual assets, it could potentially amass over $16 billion—a sum significantly surpassing its debts.
The bankruptcy expert added, “We are delighted to be in a position to propose a Chapter 11 plan that provides for the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors.”
The dollar denominators of a significant portion of the company’s assets—highly speculative digital commodities and interest in high-growth startups—have benefited the business. Before the November 2022 collapse of FTX, the value of one bitcoin was approximately $20,000; presently, its value has increased by over threefold.
Legally speaking, FTX creditors, who are primarily former platform users, will receive reimbursement for their lost funds. Nevertheless, from a pragmatic standpoint, they might experience diminished satisfaction because they were compelled to divest their cryptocurrency holdings during that period’s steep discounts, thus preceding recent profits.
Additionally, FTX has benefited from its substantial investment in Anthropic, an artificial intelligence startup founded by a cohort of former OpenAI employees who resigned due to disagreements with charismatic CEO Sam Altman. The exchange sold that stake for $824 million in March of this year.
In March, Bankman-Fried received a 25-year prison sentence for his involvement in the fraudulent collapse of the company.
During his trial, he attempted to have the anticipated restitution of all depositors considered a mitigating circumstance in his sentence. According to Bankman-Fried, the company could have potentially resolved its liquidity issues through trade had Ray not intervened and suspended the company’s accounts.
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Judge Lewis Kaplan categorically dismissed the claim, deeming it “misleading, logically flawed, and speculative.”
Kaplan said, “A thief who successfully wagers stolen funds in Las Vegas is not eligible for a sentence reduction.”
Court approval of the FTX proposal is still necessary before the distribution of funds to former depositors.
Ray commenced employment at FTX shortly before the organization’s bankruptcy declaration, much to the dismay of Bankman-Fried, who articulated his preference for a successor who would sustain the business in its current state.
Before joining FTX, Ray held the most prominent position possible: supervising the demise of Enron, a Californian energy behemoth. Following the company’s recovery from insolvency in 2004, he assumed the position of chair and oversaw the dissolution of its operations for five years. Ultimately, he could reimburse creditor funds over fifty percent.
