Crypto exchange FTX is the rare financial blowup that will repay victims in full

livemint.com:

Defunct crypto exchange FTX said it will have more than enough money to fully repay its millions of swindled customers with interest, an outcome that seemed unthinkable when it collapsed into bankruptcy in 2022.

FTX said in court papers Tuesday that it will have $14.5 billion to $16.3 billion in cash after liquidating its cryptocurrency holdings and other investments, more than enough to cover the roughly $11 billion that customers and nongovernment creditors are owed.

That customer money has been trapped since November 2022, when Sam Bankman-Fried ceded control of FTX to a new management team that filed it for bankruptcy, beginning one of the largest-ever efforts to recover misappropriated funds.

The management team found enough funds for FTX’s creditors thanks to a rally in cryptocurrency prices and the sale of stakes the company acquired—with users’ money—in speculative crypto projects and other technology ventures. The bankruptcy process gave FTX the time it needed to find buyers and fill in the nearly $9 billion balance-sheet hole it entered chapter 11 with.

If approved in court, the repayment plan would make FTX the rare case of financial fraud that compensates its victims in full, and relatively quickly. By way of comparison, account holders at Bernard Madoff’s firm have waited more than a decade and a half for their stolen money to trickle back after his 2008 arrest for operating a Ponzi scheme.

Aside from FTX’s millions of individual customers, some of Wall Street’s biggest investment firms are among the winners. They bet that, when FTX filed for bankruptcy, many of its customers would want to—or need to—cash out their claims against the exchange rather than wait years to see how much they might recover.

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