FTX Trading Ltd., the crypto exchange which used to be one of the biggest and most popular platforms in the industry, is approaching its bankruptcy case end after its founder and CEO Sam Bankman-Fried was sentenced on planning huge fraud that led to FTX bankruptcy, according to Bloomberg Dec 18th.
The bankrupt exchange last year filed for Chapter 11 protection and presented a reorganization plan, paying billions of dollars back to its customers and creditors waiting months for resolution.
The plan revealed on Monday outlines how FTX would distribute its remaining assets and liabilities among its stakeholders. Many crypto holdings the exchange held will be liquidated under the plan in favor of some of its debts.
The plan still needs creditors’ permission, and US Bankruptcy Judge John Dorsey will eventually check it for errors and omissions. Creditors have until next year to vote on the plan, which is expected to go through amendments before then.
The major creditor and customer groups involved in the case have agreed to support the broad outlines of the plan. However, some details remain unclear or controversial.
FTX’s Controversial Ascent to Prominence
Bankman-Fried, a former hedge fund manager, started FTX in 2019 to create a decentralized platform for trading cryptocurrencies. It quickly gained popularity among traders and investors looking to make high returns at low fees.
However, behind the scenes, FTX was associated with a huge fraud scheme that included price manipulation, volume exaggeration, and loss hiding. An anonymous whistleblower revealed it in October 2022, and the report noted that the exchange had forged fake accounts and bots to create artificial demand and supply of some tokens.
This revelation triggered a massive sell-off that wiped out billions of dollars from FTX’s market value. Clients, mainly US-based retail investors who had parked cash or crypto on FTX, lost fortunes, if not all, their money. The SEC probed FTX’s activities and leveled charges against Bankman-Fried and several other executives.
Bankman-Fried agreed to give up control of his company to restructuring professionals in November 2022. He pleaded guilty to multiple fraud and money laundering charges in December 2022. His crimes could put him in prison for as much as 20 years.