The big picture: The collapse of FTX was the result of one of the biggest corporate frauds in US history, leading to investors collectively losing around $11 billion. While many never expected to recover their funds, new court records filed this week suggest they could potentially recoup their losses with interest.
According to The New York Times, FTX customers may be reimbursed for their entire losses from the firm's collapse in 2022. Additionally, they could receive interest of up to nine percent on their investments. Under a proposed plan, investors who filed claims for up to $50,000 would receive at least 118 percent of their investment, with some potentially receiving as much as 142 percent within 60 days of the plan taking effect.
The news follows the bankrupt crypto exchange's recovery of property valued between $14.5 billion and $16.3 billion from assets held by various government agencies in the US, Australia, and the Bahamas, as well as numerous private parties. According to the announcement, the monetized properties include an "extraordinarily diverse collection of assets," most of which were proprietary investments held by Alameda or FTX Ventures businesses.
The biggest beneficiaries of the payback, however, will be a handful of hedge funds, not the actual investors who lost their hard-earned money. Many of the firms that trade bankruptcy claims reportedly bought up claims from FTX customers for a few cents on the dollar once the scam came to light. According to Fortune, Attestor, Baupost, and Farallon will be three of the biggest winners once the payments are disbursed, as they had bought claims worth over $520 million, $518 million, and $346 million, respectively.
One of the main factors behind the recovery is the surge in the value of Bitcoin, which is up nearly 200 percent in the last couple of years. The impressive rise has helped FTX's crypto assets appreciate significantly, allowing the company to use those funds to pay back its customers. The AI boom also helped the company, as its shares in the AI startup Anthropic recently sold for $880 million, a healthy premium over the price at which they were bought.
The FTX saga started in late 2022 when the US FTC opened an investigation into the firm's mishandling of withdrawal requests. This opened the proverbial Pandora's box, with investigators establishing that the company's founder and CEO, Sam Bankman-Fried, was illegally siphoning money from the crypto exchange to his hedge fund, Alameda Research. Bankman-Fried was subsequently arrested and convicted for securities fraud, wire fraud, and money laundering. He was sentenced to 25 years in prison and is currently serving time at MDC Brooklyn.
FTX customers could get back all the money they lost in the scam
