FTX customers will get their money back and more, but the biggest winners are bankrupt traders

In a rare bankruptcy outcome, the cryptocurrency exchange’s customers went bankrupt FTX they will get all their money back and more. Those who lost money when the exchange collapsed in November 2022 are owed about $11 billion, but the estate has been able to recover up to $16.3 billion, court documents filed Tuesday show. Accordingly, the credits will be repaid with interest.

John Ray, CEO of FTX who replaced Sam Bankman-Fried, who currently serves at Sentenced to 25 years in prison, was tasked with assembling the estate’s assets. “John and the team absolutely crushed it,” Thomas Braziel, a broker at 117 Partners who buys FTX credits on behalf of some of the largest hedge funds in the market, told Fortune.

The exact amount that customers will be refunded depends on the type of complaint filed. While some could get back up to 142% of what they held, the vast majority will likely receive 118%. The specific payday is estimated to be months away.

While the gains are unusual and impressive, the biggest winners in the FTX deal are those negotiating bankruptcy claims. After the stock market crashed in late 2022, a handful of hedge funds and individual investors moved quickly and began buying credits for pennies on the dollar before the stock exchange even officially declared bankruptcy. Data from Claims Market, an online brokerage platform that has facilitated the trading of more than 500 claims, shows that the offering price of claims increased by 10% to 101% as of Wednesday.

Chapter 11 filings, as of March 20, show that the buyers set to get the biggest returns from FTX scraps are hedge funds that specialize in distressed debt. Attestor, Baupost and Farallon, which each purchased credits worth more than $520 million, $518 million and $346 million respectively, are leading the race. The funds used alternative entity names confirmed by people familiar with the matter.

Louis d’Origny, founder of the claims-buying platform FTX Creditor, who bet his personal funds on a full recovery and expected to earn more than $25 million. He says he was “incredibly, pleasantly surprised” by the announcement. Ray sold “everything that wasn’t nailed to the floor,” he said.

The profitable recovery is partly due to the cryptocurrency market’s revamp starting in 2022, with Bitcoin up more than 190% since the exchange went bust. As a result, the value of the company’s crypto assets has increased. Similarly, FTX shares in AI startup Anthropic also appreciated in value and were sold more than 880 million dollars. Additionally, FTX owns 38 properties in the Bahamas and has recovered $2.6 billion in cash, according to data contained in a presentation filed as part of your case.

But not all claimants are happy with the results, with some investors arguing that the current value of their crypto tokens should be respected. Arush Sehgal, an investor who had $4 million on the platform and a former member of FTX’s unsecured creditors committee, told Fortune that Ray would have sold the property at “lowest market prices” in September 2023 had he not been for the intervention of the UCC. “The damage done to real estate by John Ray has now surpassed Bankman-Fried’s original crime,” he claims.

Last month, Bloomberg reported that FTX Ownership sold approximately two-thirds of its $2.6 billion in Solana tokens in a heavily discounted deal. The receivers who oversaw FTX’s ownership were sold out SOL at $64 per token, sources familiar with the matter told Bloomberg, raising as much as $1.9 billion for the property. At the time of publication, however, the token is trading at around $148.

These agreements outraged some victims, including Sunil Kavuri, who criticized Bankman-Fried’s “continued lie that we will all be satisfied” during her sentencing.

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