14 May, 2024

FTX Victims Recoup Over 100% in Crypto Bull Market

Susan Oh
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Susan Oh
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Susan Oh is a leading figure in the integration of AI and blockchain for social good, serving as the CMO for BeOmni by Beyond Imagination and a civic technologist dedicated to creating scalable solutions. She is a board member of the Blockchain Commission For Sustainable Development supported by the UN GA Office of Partnerships, and...
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Key Takeaways
  • Most of FTX’s customers will see more than 100% of their losses returned thanks to the significant increase in the value of FTX’s crypto holdings.
  • Some customers are complaining that the cash value of their crypto tokens in November 2022 terms does not reflect their true loss.

FTX Customers Recoup Over 100% in Crypto Bull Market

Sam Bankman-Fried
Sam Bankman-Fried | Source: AFP

The bull market in crypto has benefited an unexpected group: FTX’s former customers.

The bankrupt former crypto exchange now expects 98% of its customers to recoup approximately 118% of their allotted claims.

In similar cases, it has taken years to find the remaining assets, and the amount returned is often a fraction of the total value lost.

However, thanks to the intervening bull market in crypto, all these customers will see their full losses returned. 

FTX’s massive Solana holdings have performed particularly well, with the liquidation now causing rumblings in Solana trading.

The fraud and mismanagement at FTX had led to more than $8 billion in customers’ funds being lost by the crypto exchange. 

The former crypto exchange had only 1.2% of the Ethereum and 0.8% of the Bitcoin that were meant to be held on behalf of customers. 

FTX forecasts that the final value of all assets for distribution will be between $14.5 and $16.3 billion when converted to cash.

However, not everyone is pleased with the outcome.

Many are complaining that the November 2022 dollar value of their crypto holdings does not reflect the true value lost over the recent crypto bull market.

November 2022 Dollar Value Still Not Enough

Many of FTX’s former customers feel that returning 118% of their losses is not enough compensation.

While the windfall resulting from the crypto bull market has made customers’ cash losses whole, their claims still only reflect the November 2022 value of their accounts.

This means that they will lose all the value that they would have gained had they held their tokens through the recent crypto bull market.

For example, Bitcoin has risen by more than 250% since FTX filed for bankruptcy.

Many customers feel that they are being cheated by the crypto value of their claims being distributed to other creditors and regulatory agencies in the form of settlements.

“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.”

– John J. Ray III, CEO and Chief Restructuring Officer of FTX, stated.

FTX Crypto Liquidation Making Market Waves

The proposed liquidation of FTX’s remaining crypto holdings is having an impact on many of the relevant crypto markets.

FTX’s Solana holdings were particularly large given its comparatively small market capitalization in November 2022.

Solana’s meteoric rise since then has made it a major contributor to the total asset value recouped in the bankruptcy.

News of the liquidation hit Solana hard, as investors are expecting a significant supply from the liquidation to rapidly pour into the markets. 

While bankruptcy liquidations of crypto holdings have traditionally been gradual, the news of the FTX liquidation is still causing significant concern.