How FTX users can get their money back — three (almost) impossible conditions

FTX users will be able to return 40% of their deposits. But don’t get happy beforehand, not everyone will get the refund and they will have to perform one condition, but even in this case the probability of getting the accumulated is small. 

Recall that on November 11 crypto exchange FTX filed for bankruptcy after it crashed due to a lack of liquidity. The cryptocurrency market went to the bottom, which caused almost all digital assets to drop in value. Now the situation has somewhat stabilized and the market is very slow but recovering. 

Now one of the main problems for the FTX is to return funds to users, but the amount is so big that it is unlikely that everyone will get it. Thus, the crypto exchange has about one million creditors, as well as the same number of users. The last ones, according to analytical company Messari, stored a total of about $8.4B on the exchange 

How can you get your money back?

As we noted above, not all users will be able to get their funds back, but only 40% of users. However, if FTX sells $4B worth of realizable assets, including stablecoin and Bitcoin, users will be able to get about 10% more of their deposits.

According to Messari’s analysis, consumers will be able to get their funds back if: 

1. FTX-related assets, such as SRM (Serum) and FTT, drop to zero;
2. the company would first return funds to users rather than to creditors;
3. the preliminary balance sheet used is error-free.

What could go wrong?

The first condition is the most likely. As of this writing, FTT is trading at $1.64 per coin, and trading volume is down 41.65% in the last 24 hours. The current Serum price is $0.2762 and trading volume is down 60,91% in the last day.

But unfortunately, the last two conditions are unlikely because no one can say for sure or substantiate the integrity of the preliminary balance sheet, and FTX users will certainly not be paid out first. In the last case, everything is complicated by the bankruptcy procedure, according to which any company that goes through it can choose the appropriate way of bankruptcy. FTX has chosen one that prioritizes settlement with creditors, with unsecured creditors a company that lends money without obtaining collateral for a line of credit in second place, and then users. 

Now another cryptocurrency exchange Celsius is going through bankruptcy proceedings. Earlier, it was reported that the platform’s users will probably be able to get their funds back through an asset recovery program for customers. In order to do this, the court must unlock the funds of a special group of customers — those who kept the funds in their wallets for long-term storage. 

Going back to FTX, if exchange users fall into the same category as Celsius users, they could be second in line to receive their money. However, bankruptcy proceedings take a long time, so given the complexity and the near impossibility of fulfilling the conditions described above, it seems that users will not get their money back, but the reverse is also likely. 

Enlighten Law Group lawyers, representing the interests of Taiwanese investors, suggest that the FTX bankruptcy process will take about three years, as it was in the liquidation of the investment bank Lehman Brothers. 

What does the internet say about it?

Crypto blogger Autism Capital posted a document on Twitter describing how Alameda Research, which is also owned by FTX CEO, lost its money. The information is unconfirmed, but if the note is to be believed, FTX was spending a lot of money. It is mentioned that the company invested liquid assets in dead-end projects, bought luxury apartments in the Bahamas, and used user funds to cover holes in its balance sheets.

According to crypto enthusiast Jaka Hudoklin, this is crazy and Alameda should be liquidated immediately. It will affect FTX, but at least it will help users get their money back. That would be great. Don’t you think so?