5 - $16.3 Billion Collection for Distribution

In a surprising turn of events, FTX, the bankrupt crypto exchange, has unveiled a proposal to pay all creditors' claims in full, with some standing to receive over 100% of their claims. The proposal, which is currently awaiting approval from the Bankruptcy Court, outlines a compensation plan that would provide creditors with $50,000 claims or less with approximately 118% of their allowed claims.

According to FTX's plan, it is anticipated that 98% of FTX's creditors will receive around 118% of their claim amounts within 60 days after the plan takes effect. This reaffirms FTX's commitment to fully compensate its creditors, as stated by the Chief Structuring Officer and FTX CEO, John J. Ray III.

"We are pleased to be in a position to propose a Chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors," said Ray III.

It's worth noting that the compensation will be based on November 2022 discounted prices. To put this into perspective, in November 2022, Bitcoin was trading at $15,000, which has since risen by approximately 300% to its current value of $62,000. Other creditors will also receive 100% of their allowed claims, along with additional compensation for the time value of their investments.

FTX estimates that the total recovered funds could amount to a staggering $14.5 billion to $16.3 billion. Prior to the bankruptcy proceedings, FTX faced a significant shortfall, with only 0.1% of Bitcoin and 1.2% of Ethereum expected to cover the customers' funds. However, through the sale of FTX's crypto holdings, such as Solana, Avalanche, and Polygon, as well as the majority stake in AI startup Anthropic, the defunct exchange has managed to recover a substantial amount.

In addition to the recovered funds, if a consensus settlement is approved with government entities, other creditors may receive additional payments. FTX has highlighted an arrangement with the US Department of Justice (DoJ), which could potentially extend "over $1.2 billion of forfeiture proceeds" to creditors.

Reacting to the proposed plan, Bloomberg ETF analyst James Seyffart expressed that FTX's creditors would have been better off holding onto their assets. However, he acknowledged that allowing creditors to receive more than 100% of their claim value from the time of bankruptcy is a step in the right direction morally.

As FTX awaits the Bankruptcy Court's approval, the cryptocurrency community will be closely watching the outcome, as it could set a precedent for the treatment of creditors in future cases involving crypto exchanges.