There are many moving parts to the FTX bankruptcy, but exchange customers, especially small ones, stand to reclaim most of their lost assets if the U.S. government does not elbow them out of the way.
There are many moving parts to the FTX bankruptcy, but exchange customers, especially small ones, stand to reclaim most of their lost assets if the U.S. government does not elbow them out of the way.
While Sam Bankman-Fried fights for his freedom in criminal court, former customers of his FTX cryptocurrency exchange who have lost about $16 billion in assets are inching toward getting most of their money back.
FTX Trading, now being run by bankruptcy specialist John J. Ray III, announced this month that customers can expect to recoup over 90% of the “distributable value” of the funds recovered from the failed enterprise. But while it plans to direct the lion’s share of the pie to customers who held investments on its international and U.S. exchanges, it failed to specify how big that recovery pie might be. That depends on how many assets there actually are and when and how they can be distributed to creditors. Equity investors, mostly venture capitalists like Sequoia Capital and Temasek, will be wiped out under the plan, and lower-ranking creditors, including trading partners of the Alameda Research affiliate, are likely to suffer significant losses.
Insiders such as former FTX US General Counsel Ryne Miller and company co-founders Gary Wang and Bankman-Fried—the latter of whom is on trial for a litany of charges related to the bankruptcy including fraud and money laundering—are precluded from recovering anything.
It turns out that smaller customers stand to reclaim most of their money as the company unearths previously missing assets and some investments appreciate in value. A Forbes tally of customer claims and visible FTX assets (see table below) estimates that nearly $13 billion of the $15 billion in claims is accounted for. That should mean almost full restitution for account holders who withdrew less than $250,000 on the FTX.com and FTX.US exchanges. Those with more are subject to a 15% clawback of funds withdrawn in the final calamitous days of the crypto conglomerate’s operations.
There’s one big problem: the Internal Revenue Service claims that FTX owes it $44 billion, a figure likely to preclude much or all of the recovery for any other creditors, depending on who gets first crack at the assets. The agency has filed its demands against various FTX entities for things like failing to withhold payroll taxes as administrative claims, which at least in theory may take precedence over lost customer funds, overwhelming the company’s visible assets.FTX Assets Could Satisfy Most Customer Claims
One big source of recovery is customers themselves. Those with net withdrawals above $250,000 during the nine days before FTX’s bankruptcy petition will effectively contribute about $1.
