FTX customers will get their money back and more—but the biggest winners are bankruptcy traders

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In a rare outcome for bankruptcy, customers of the failed cryptocurrency exchange FTX will recover all of their money—and then some. Those who lost money when the exchange collapsed in November 2022 are owed around $11 billion, but the estate been able to recover as much as $16.3 billion, court records filed on Tuesday show. As a result, claims will be repaid with interest.

John Ray, FTX’s CEO who replaced Sam Bankman-Fried, who is currently serving a 25-year prison sentence, has been in charge of cobbling together the estate’s assets. “John and the team absolutely crushed it,” Thomas Braziel, a broker at 117 Partners who buys FTX claims on behalf of some of the largest hedge funds in the market, told Fortune.

The exact value customers will be repaid depends on the type of claim they filed. While some could recover as much as 142% of what they held, the vast majority are likely to receive 118%. The specific pay day is estimated to be months away.

While the gains are unusual and impressive, the biggest winners in the FTX affair are those who trade bankruptcy claims. After the exchange collapsed in late 2022, a handful of hedge funds and individual investors moved quickly, and began buying up claims for a few cents on the dollar before the exchange even officially filed for bankruptcy. Data from Claims Market, an online brokerage platform that has facilitated the trade of over 500 claims, shows that the bid price of claims has risen from 10% to 101% as of Wednesday.

Chapter 11 filings, as of March 20, show the buyers set to make the largest returns from FTX scraps are hedge funds specializing in distressed debt. Attestor, Baupost, and Farallon, which had each bought claims worth over $520 million, $518 million, and $346 million, respectively, are leading the race. The funds have used alternative entity names confirmed by people close to the matter.

Louis d’Origny, founder of claims buying platform FTX Creditor, who bet his personal funds on a full recovery, and set to profit over $25 million. He says he’s “incredibly, pleasantly surprised” with the announcement. Ray has sold “everything that wasn’t nailed down to the floor,” he said.

The lucrative recovery is partially due to the crypto market’s renewal since 2022, with Bitcoin up over 190% since the exchange went bust. As a result, the company’s crypto assets have appreciated in value. Likewise, FTX’s shares in the AI startup Anthropic have also appreciated in value, and were sold for more than $880 million. In addition, FTX has 38 properties in the Bahamas, and recovered $2.6 billion in cash, according to data in a presentation filed as part of its case.

But not every claimant is happy with the results, with some investors arguing that the present day value of their crypto tokens should be honored. Arush Sehgal, an investor who had $4 million on the platform, and previous member of the FTX unsecured creditors’ committee, told Fortune that Ray would have sold the estate’s at “market bottom prices” in September 2023 had it not been for the UCC’s intervention. “The damage done to the estate assets by John Ray has now exceeded Bankman-Fried’s original crime,” he argues.

Last month, Bloomberg reported that the FTX estate sold about two-thirds of its $2.6 billion in Solana tokens in a deeply discounted deal. The bankruptcy administrators overseeing FTX’s estate sold SOL at $64 per token, sources close to the matter told Bloomberg, raising up to $1.9 billion for the estate. The token, however, is trading at around $148 at the time of publication.  

These deals have outraged some victims, including Sunil Kavuri, who criticized Bankman-Fried’s “continuous lie that we will all be made full” at his sentencing.

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