Bankruptcy Court Greenlights FTX’s Restructuring Plan

U.S. Bankruptcy Judge John Dorsey has officially signed off on a plan for FTX, the once-prominent cryptocurrency exchange, to wind down its operations and begin compensating its users.

During a court session on October 7 in the Delaware Bankruptcy Court, Judge Dorsey gave his approval for FTX’s liquidation strategy. This plan will allow the company to start repaying 98% of users with around 119% of their claimed account values. This ruling comes nearly two years after FTX filed for bankruptcy in November 2022, which led to multiple criminal charges and civil litigation.

“This Court approval marks a crucial step forward in our mission to return funds to customers and creditors,” said FTX’s CEO and chief restructuring officer, John J. Ray III, who further explained:

“As we move forward, we are on track to deliver 100% of bankruptcy claims with added interest for non-governmental creditors, making this one of the largest and most intricate bankruptcy asset distributions ever.”

Not everyone is happy with the plan.

Critics have voiced concerns that while the plan aims to reimburse creditors for the assets they held at FTX, it doesn’t consider the significant gains many tokens have seen between November 2022 and 2024. Sunil Kavuri, an FTX creditor present at the hearing, previously argued that users might recover only 10-25% of their crypto’s original value.

At the time FTX declared bankruptcy in 2022, Bitcoin was valued at around $16,000. By the time of this report, Bitcoin’s price had skyrocketed to over $63,000. This price surge has left millions of users unable to access the billions locked in their FTX accounts for nearly two years.

Several of FTX’s top executives are facing long prison sentences due to their involvement in the company’s collapse. Sam Bankman-Fried, the former CEO, was handed a 25-year prison sentence after his conviction in 2023. Meanwhile, Caroline Ellison, the former CEO of Alameda Research, was sentenced to two years in prison in late September.

It remains uncertain when FTX will begin reimbursing users following the judge’s ruling. There were rumors in September about claims being paid out, but those turned out to be untrue. Once billions in funds are released to users, it could cause a significant shift in the crypto market, much like the Mt. Gox repayments did in mid-2024.

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