FTX Bankruptcy Victims Finally Compensated—But in USD, Not Crypto

The bankruptcy of the crypto exchange FTX in November 2022 hit customers hard: They lost access to their Bitcoin and other assets almost overnight, and only now are they being compensated, and the method is unfavorable.

The insolvency of the crypto exchange FTX and its subsidiaries shook the crypto scene in November 2022, with billions of US dollars in Bitcoin and other assets suddenly “disappearing.” FTX founder Sam Bankman Fried has long since been sentenced to 25 years in prison for fraud, but former customers had to wait until this year for compensation.

Compensation payments for claims of less than $50,000 were made in February, and larger cash inflows are now being prepared. According to Bloomberg , FTX insolvency administrators still have $11.4 billion at their disposal to pay out victims who lost more than $50,000 in the fraudulent collapse, starting May 30.

In itself, this amount, plus the approximately $5 billion already paid out, roughly corresponds to the damages also mentioned during the legal investigation into the FTX scandal. The problem: After much back and forth, the insolvency administrators finally prevailed a good year ago with their plan to pay compensation in US dollars and use November 11th, 2022, as the basis for their calculations. On that day, FTX declared bankruptcy, but most of the victims held Bitcoin, Ethereum , Solana, XRP, and other cryptocurrencies on the platform, not US dollars .

This results in huge differences in the assessment of damages today. Compared to November 11, 2022, Bitcoin has now gained around 500 percent, Solana even 650 percent, XRP (Ripple) is up 450 percent, and Ethereum is still up almost 50 percent.

Compensation payments amounting to 118 percent of the book value as of November 11th, 2022, have been announced, calculated in US dollars. If the FTX victims had been given the choice of being paid out in US dollars or crypto, the option of Bitcoin and other cryptocurrencies would normally have been much more attractive.

Conclusion: Final spurt for FTX victims in compensation

All good things come to those who wait – in the case of the FTX scandal, this saying unfortunately doesn’t hold true. The controversial decision to pay compensation in US dollars instead of crypto feels like a mistake to FTX victims.

However, this is no longer being changed, and experts are already wondering what portion of the $11 billion flowing to former FTX customers starting in late May will be reinvested in Bitcoin , XRP, Solana, and other altcoins.

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(Featured image by Tima Miroshnichenko via Pexels)

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