Former exchange FTX decided at the latest court hearing on Wednesday, January 31, 2024, that they expect to repay all customer assets soon. Losses have been estimated to be $8,700,000,000 worth of various assets. The majority of it ($6,400,000,000) was a mix of fiat and stablecoin assets while the rest were volatile crypto.
This cash was originally planned to be used to revive the FTX exchange and repay what was owed gradually. However, they declared that they opted to liquidate all assets and return funds to customers instead. It was a decision made after Sam Bankman-Fried, FTX founder and owner, failed to negotiate with potential investors to help his endeavour.
What is FTX and why do they have to repay customer assets?
FTX was one of the most prominent exchanges in the blockchain market. Many prefer it over Binance and Coinbase for their robust features in advanced crypto trading. They used to carry their tagline ‘made by traders for traders’ with great pride. Their usual customers range from institutions like banks to individuals like crypto casino online players.
Unfortunately for the exchange, Binance exposed FTX native assets (FTT) to alarming trends as a result of being speculative cryptocurrency tokens. This revelation inspired concerns over the exchange’s security and credibility, prompting customers to withdraw en masse. The surge of withdrawals pushed FTX and its affiliated trading firm, Alameda Research, to bankruptcy.
Both companies officially announced bankruptcy in early November 2022. A month later, Bankman-Fried is charged with criminal charges for misappropriating over $8,000,000,000 in customer deposits. This is the amount that the company aims to pay back on top of Bankman-Fried facing up to 110 years in prison.
Why are people upset by this revelation?
Customers getting paid back their losses should be a cause for celebration but not this time. The $8,000,000,000 estimated value to be repaid is based on market prices of all assets lost during FTX’s collapse in November 2022. Bitcoin (BTC) was just around $16,500 to $17,600 at the time following a crypto winter which is one of the lowest for the asset in recent history.
Recently, Bitcoin has reached an average trading price of around $43,000 as of January 2024. It is expected to push even further past $45,000 in the latter half of the year thanks to strong liquidation coming from Bitcoin ETF offerings. The former FTX customers were expecting to receive their assets back to cash them out at today’s market prices.
Unfortunately, that is not going to happen. The court hearings have agreed that FTX only pays their customers equal to how much their assets were worth at the time of their bankruptcy. The date of reference is 11th November 2022.
It is still a lot of money to be paid but it’s not as big as it should have been. Many consider it a great loss. The refunds may be in United States dollar (USD) rather than crypto considering it’s the US Department of Justice (DoJ) handling the matter. Therefore, it will go to customers’ banks rather than their exchange wallets or crypto casino online accounts.
