In a surprising turn of events, bankrupt cryptocurrency exchange FTX recently announced a new repayment plan to reimburse creditors and customers in full. The plan also includes a substantial compensation offer to account for the time value of their investments.
While customers initially expected to be the primary beneficiaries, the biggest winners in this repayment plan are not the customers themselves but rather bankruptcy traders.
Full Refunds Offered By FTX
As reported by Bitcoinist, FTX’s reorganization plan, filed with the United States Bankruptcy Court of Delaware, outlines the allocation of funds to customers affected by the exchange’s fraudulent scheme.
The plan involves a centralized distribution of all the company’s assets from its collapse in November 2022 to its creditors and customers. FTX has disclosed various settlements with primary economic stakeholders, some pending finalization and court approval.
Notably, a key settlement involves resolving the $24 billion in claims filed by the Internal Revenue Service (IRS), with FTX agreeing to a $200 million cash payment and a $685 million subordinate claim.
Elevating Bankruptcy Traders To Winners
Contrary to expectations, the true beneficiaries of the repayment plan are bankruptcy traders who swiftly moved to purchase claims at a fraction of their value before FTX officially filed for bankruptcy.
These hedge funds and individual investors have seen the bid price of claims rise from 10% to 101%, demonstrating their shrewdness in seizing this opportunity.
According to Fortune Magazine, hedge funds specializing in distressed debt, such as Attestor, Baupost, and Farallon, have emerged as frontrunners in reaping substantial returns from FTX’s assets.
These funds, which acquired claims worth “hundreds of millions of dollars,” stand to make significant profits. Other notable beneficiaries include Louis d’Origny, the founder of claims buying platform FTX Creditor, who is set to profit over $25 million from personal investments.
However, while the repayment plan has yielded impressive gains for some, not all claimants are satisfied. Some investors argue that the present-day value of their crypto tokens should be honored, expressing concerns over how assets were sold.
Arush Sehgal, an investor and former member of the FTX unsecured creditors’ committee, criticizes the estate’s selling practices and claims that damage done by the current administrator exceeds the original crime committed by former CEO Sam Bankman-Fried.
The failed co-founder and CEO of the exchange Bankman-Fried was sentenced to 25 years in prison for defrauding customers and is currently being held at the Metropolitan Detention Center in Brooklyn.
FTT is trading at $2.015, up more than 25% in the last 24 hours alone, fueled by the repayment announcement.
Featured image from Shutterstock, chart from TradingView.com