The big question that’s hanging over the $26bn FTX payout

The big question that’s hanging over the $26bn FTX payout
FTX founder and former CEO Sam Bankman-Fried recently began serving a 25-year sentence for stealing $8 billion from the customers of his now bankrupt exchange. Credit: Shutterstock
  • Lawyers have proposed a plan to return funds to FTX customers.
  • The plan could see them get back their money plus interest.
  • That's only if regulators and the taxman agree to step out the way.

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FTX expects to scrape together up to $16 billion to return to creditors.

That’s a big deal — there were times when it seemed that cheated investors would get nothing.

If FTX’s plan is approved by a bankruptcy court, investors stand to recover what they lost plus 9% interest — at least, according to the plan’s authors.

But if we’re correctly reading the 90-page proposed payout plan and its accompanying 163-page explainer, whether FTX’s victims get those interest payments depends on a big question.

Will the US government let ordinary investors have first dibs?

What’s at stake?

To recap: FTX, the crypto exchange founded by one-time wunderkind Sam Bankman-Fried, had a run on customer deposits in late 2022.

That led to revelations that FTX was a massive fraud that took customer funds, mingled them with its own, and spent on political influence, celebrity endorsements, and fancy real estate.

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While FTX went into bankruptcy, law enforcement and government circled — including the Commodity Futures Trading Commission and Internal Revenue Service.

The CFTC has since asked the estate for $8.7 billion in fines, and the US tax authority is seeking $24 billion in back taxes.

The order in which creditors get paid is a major consideration of US bankruptcy law. If you’re a creditor, you want to be first in line, because the money might run out before it reaches those at the back.

FTX is basically asking the CFTC, IRS, and any other government agency that might lay claims to the estate that they subordinate their claims to those of ordinary investors, allowing the investors first crack at the payout.

The catch?

Neither agency has agreed to this yet, and the plan says “there can be no assurances” that they will.

So we’re asking: Does the government have much incentive to forgo billions of dollars and the satisfaction of restitution after an embarrassing regulatory failure?

Especially since the great majority of FTX’s depositors — 79% — it turns out, aren’t even in the US?

Angry victims

That’s not clear yet. What is interesting, though, is that the promise of interest payments seems aimed at propitiating angry victims.

Loads of FTX creditors hate this proposed plan because their payouts won’t be in Bitcoin and Ether.

Rather, the payouts will be in cash set at the dollar value of their crypto on the day FTX filed for bankruptcy: November 11, 2022, when Bitcoin’s price was over 70% lower than it is today. Yikes.

They won’t enjoy this year’s historic rally in crypto markets, which saw Bitcoin hit a new all-time high.

And even as some customers insist they’ve been shortchanged, a question remains: Will they get repaid even at crypto’s rock-bottom 2022 prices?

Joanna Wright is a regulatory correspondent fand Aleks Gilbert is a DeFi reporter for DL News. Email them at or

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