The massive collapse of the cryptocurrency exchange FTX in recent weeks has generated a lot of fear and uncertainty in the financial and cryptocurrency industries.
When FTX's founder and CEO Sam Bankman-Fried transferred $10 billion of customer monies from FTX to his private trading company, Alameda Research, at least $1 billion of customer funds disappeared from the defunct exchange.
Since then, a sizable chunk of that sum has vanished, leaving a hole in the market worth billions of dollars and devastating many individuals and corporations.
However, as the state of the exchange slowly unravels, it has come to light that the now-bankrupt exchange owes about 50 separate investors billions of dollars and might take decades to repay its debts.
The cryptocurrency exchange FTX has revealed that it now owes its 50 largest creditors close to $3.1 billion.
According to documents filed in the Delaware bankruptcy court, the exchange has applied for bankruptcy court protection in the United States.
The filing revealed how much loss the exchange's clients could incur, even though it withheld the names of the parties involved in the quick collapse of FTX.
The cryptocurrency exchange announced that it has started a strategic evaluation of its worldwide assets and is putting some firms up for sale or reorganization.
According to a different court filing, a hearing on FTX's so-called first-day motions is scheduled for Tuesday morning this week before a U.S. bankruptcy judge.
Without naming them, the exchange stated in a court statement that its top ten debtors are owed almost $1.45 billion, each of which is approximately $100 million.
According to the filing, the debt is not owed to business insiders and may change as new information becomes available.
However, FTX owes its third biggest creditor $174 million, its fiftieth biggest creditor almost $21 million, and its largest creditor slightly more than $276 million.
Although the exchange disclosed that it might have more than 1 million creditors last week, the filing may only be the tip of what the bankrupt exchange owes.
Interestingly, while the name of the third creditor was not revealed, the details tally with that of Gemini, which disclosed last week that it has $175 million in its FTX account.
The question on the minds of FTX's investors is when they will be able to get their money from the cryptocurrency exchange.
However, according to recent reports, insolvency attorneys have mentioned that this might take "decades."
One of these attorneys is Stephen Earl, a partner at Australia's CO Cordis.
According to Earl, releasing the crypto assets from FTX and determining how to distribute the money will take a lot of time. He further stated that the procedure might take years or even decades.
Earl says these difficulties will likely come from conflicting jurisdictions and complex cross-border insolvency issues.
The former FTX customers are regrettably in line with everyone else, including creditors, investors, and venture capital funders. They advise individuals who have made crypto-crypto trades that they may not receive dividends for "years."
Anyone who holds funds on FTX will become a creditor. A creditors committee was established to represent their interests, according to Simon Dixon, founder of the international investment platform BnkToTheFuture.
He has been a vocal participant in the Celsius bankruptcy proceedings.
According to what is left after bankruptcy fees, the creditors will eventually have access to the residual assets.
According to the CEO of Binance Australia, these costs could be high given the time needed to recover funds. However, he also pointed out that this would result in increased legal and administrative costs that would reduce customers' returns.
Following the FTX crisis, the price of the FTX Token (FTT) fell by 90.93%. It is currently trading at about $1.259 and showing no signs of recovery.
Since 8 September 2021, when it hit an all-time high of $85.78, FTT has been in a correction. The cryptocurrency mirrored market sentiment as it entered the bear market in November and continued its downward trend.
However, the token's price is still down, with its RSI recovering under oversold conditions.
FTT is still miles under all of its major moving averages. It needs strong bullish price movement to move past the $2.5 resistance.
However, given the present market conditions, the future price movement of FTT is still under heavy speculation.
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