In a big moment for the crypto space, a U.S. judge approved a unique bankruptcy plan for FTX, once the third-largest crypto exchange by volume. This decision ended a rough period that began when FTX collapsed in November 2022. A liquidity crisis revealed an $8 billion shortfall.
The plan will repay $16 billion to creditors. Nearly all creditors, about 98%, will recover at least 118% of their losses, plus interest, all in cash. This move aims to provide restitution and set a new standard for handling digital asset bankruptcies.
The decision to repay in fiat currency rather than cryptocurrency has sparked debate. Some believe it favors those who missed the recent crypto market recovery. However, the plan’s creators argue that FTX’s native token had little value at the time of bankruptcy, making this choice necessary.
Judge John Dorsey oversees the resolution, which could see creditors receive their funds within 60 days. This marks one of the largest asset distributions in bankruptcy history. Many view this approval as a significant moment that could help restore trust in the crypto exchange sector, which has faced skepticism since FTX’s collapse. This situation highlights the need for strong regulations and the unpredictable nature of digital asset values.
