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FTX Seeks OK to Pay Customers Back in Cash

Bankrupt cryptocurrency exchange FTX is set to ask permission to repay customers in cash.

As Reuters reported Tuesday (June 25), the company will ask a judge to allow its customers to vote on a liquidation plan that would allow the cash repayments, despite protests from some customers who feel shortchanged.

Since its bankruptcy filing in 2022, FTX’s new management has been able to recover $16 billion to pay back customers, and has said it plans to repay them in full. At a hearing Tuesday, the company will ask U.S. Bankruptcy Judge John Dorsey to sign off on open voting on the company’s wind-down plan.

FTX has said its reorganization plan would give 98% of creditors 118% of their claims — in cash — within 60 days of court approval.

“FTX has achieved this recovery level by monetizing an extraordinarily diverse collection of assets, most of which were proprietary investments held by the Alameda or FTX Ventures businesses, or litigation claims,” the company said last month.

Alameda is a reference to Alameda Research, the FTX sister company at the center of the exchange’s collapse.

However, some FTX customers argue that they should be paid more, saying the company is basing its repayment plan on crypto prices from when the exchange went bankrupt in the fall of 2022. Since then, the price of bitcoin — the most popular cryptocurrency — has jumped.

Under the plan, customers that had one bitcoin deposited on FTX when it went bankrupt will receive about $16,800 in cash, while bitcoin is worth close to $60,000 as of Tuesday morning.

Last week, a group of customers asked a judge to rule that $8 billion of the company’s forfeited assets are rightfully theirs.

These customers’ attorneys, Adam Moskowitz and David Boies, said in a court filing that the bankruptcy process has left “FTX customers feeling ‘aggrieved and robbed,’ many of whom view the bankruptcy process as a ‘second act of theft’ and that the ‘FTX bankruptcy estate remains to be the same fraudulent corporate entity’ as was the enterprise run by SBF.”

“SBF” refers to former FTX chief executive Sam Bankman-Fried, who was convicted and sentenced to 25 years in prison for fraud related to the exchange’s collapse.

“If not for SBF’s crimes for which he was convicted—i.e., the theft and misuse of customer assets—the customers would have today owned their crypto investments,” the filing said.