A deal was secured to pay those who had money at defunct FTX as much as 90% of the assets that remain, and now the lawyers representing some creditors are trying to get enough of those investors on board to make it happen.
The deal also included a key second component regarding those who pulled money out of FTX before it went bankrupt. Customers who managed to get assets from the company from the time of CoinDesk's article revealing the fatal financial weakness at FTX to the moment it collapsed – a nine-day period in early November of 2022 – would have to give back 15% of those funds in exchange for freedom from the bankruptcy liquidators.
"We want to get the word out," said Sarah Paul, a lawyer with Eversheds Sutherland who represents the Ad Hoc Committee of Non-U.S. Customers and its $1 billion in claims against FTX. "This is a really great result for customers."
The creditor's group had initially pursued a legal claim that says the assets the customers had at FTX were always their own property and not FTX's, so they should get paid before any unsecured creditors. The ongoing trial of former FTX CEO Sam Bankman-Fried has revealed how badly the company apparently abused the trust and money of its customers.
"Everyone who's watching the criminal trial of Sam Bankman-Fried has seen the FTX.com customers were really the victims of mass misappropriation of their assets," Paul said in a separate interview Monday on CoinDesk TV.
But the bankruptcy negotiation was always aimed toward a settlement, because it gets money into people's hands much more quickly, Paul explained. The lawyers have until Dec. 1 to get a 75% approval rate from the 60 individuals and entities in their group and with any investors who sign up as members in the coming weeks.
The settlement, if approved by creditors, would still need a sign-off from the bankruptcy court. The end goal would be to get clear of the bankruptcy by about July 2024, when people would be able to retrieve the money that's been locked up since last year, Paul said.
The crypto industry is still too young to have a reliable track record on how much of people's money is usually recovered from a collapsed exchange reportedly riddled with fraud. But even recent history's most infamous Ponzi scheme, that of disgraced financier Bernie Madoff, ended up recovering 88% of customers' money.
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