In a stunning turn of events, cryptocurrency exchange FTX, which collapsed in November 2022, has accumulated billions of dollars more than the amount needed to cover customer losses. This extraordinary development sets the stage for a rare outcome in U.S. bankruptcy proceedings, where creditors are poised to receive full recoveries plus interest.

The FTX bankruptcy case has defied expectations, as lower-ranking creditors typically receive only a fraction of their holdings in such situations. However, FTX has benefited from a strong rally in cryptocurrencies, particularly Solana ($SOL), a token heavily backed by the exchange’s founder, Sam Bankman-Fried, who has since been convicted of fraud. Additionally, the company has successfully sold numerous other assets, including stakes in various venture capital projects, such as the artificial intelligence company Anthropic.

As Bloomberg reported, John Ray, who took over as FTX’s CEO when the company collapsed, expressed his astonishment at the outcome, stating, “In any bankruptcy, this is just an unbelievable result.” Once FTX completes the sale of all its assets, it is expected to have up to $16.3 billion in cash to distribute while owing approximately $11 billion to customers and other non-governmental creditors.

FTX’s impressive recovery is particularly striking given the initial comparisons drawn between its collapse and the fraud-fueled downfall of Enron Corp. and the unraveling of Bernie Madoff’s Ponzi scheme. Earlier this year, the company reported having about $6.4 billion in cash, a figure that has since grown substantially.

While all debts will be repaid in full, plus interest, court documents filed in federal court in Wilmington, Delaware, indicate that there will be no remaining funds for equity holders. FTX’s major equity holders include prominent names such as Sequoia Capital, Thoma Bravo, Singapore’s Temasek Holdings Pte, and the Ontario Teachers Pension Plan, as well as individuals like Tom Brady and Gisele Bündchen.

The company’s restructuring advisers have proposed setting up a fund to pay some creditors, including those who lent FTX crypto, using money that would have otherwise gone to government regulators. They have also been diligently tracking down the company’s assets and untangling a complex web of accounts scattered around the world.

The crypto rebound, which has seen the price of Bitcoin roughly quadruple since late 2022, has given a massive boost to FTX’s recoveries. Depending on the type of claim they hold, some creditors could recover as much as 142% of what they are owed, while the vast majority of customers are likely to receive 118% of their holdings on the FTX platform at the time the company entered Chapter 11 bankruptcy.

The prospect of such substantial recoveries has driven up the price of creditor claims, with some now being traded at more than 100% of their face value. This is a stark contrast to the immediate aftermath of the bankruptcy, when many claims traded for as little as three cents on the dollar.

As the FTX bankruptcy case enters its final stages, the company’s restructuring advisers have laid out new details of their proposal to distribute the cash to creditors and bring the Chapter 11 case to a close. The plan will be put to a vote by creditors, and U.S. Bankruptcy Judge John Dorsey will consider the outcome when deciding whether to approve the payout plan later this summer.

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