On the RADAR: Crypto Update
FTX Begins Repaying Customers Over Two Years After Collapse
More than two years after the dramatic collapse of once-prominent cryptocurrency exchange FTX, some of its slighted customers have begun to receive re-payments for their lost investments.
In October of 2024, a bankruptcy judge approved FTX’s initial re-organization plan that became effective on January 3rd, 2025. This included following through on a necessary timeline for repaying up to 98% of its user base even more than what they had originally lost with respect to claimed account values at the time of the firm’s collapse. After a lengthy bankruptcy and recovery process, FTX reportedly holds over $15 billion in pooled funds to be utilized to repay its customers and other debtors affected by the company’s gross mismanagement of funds and other various improprieties by the firm’s upper management that left customers exposed to significant financial loss.
This highly-anticipated repayment process follows extensive legal and financial restructuring efforts which saw FTX recover significant assets, including a large chunk from now-jailed former CEO Sam Bankman-Fried, to facilitate these distributions. The first phase of payouts centers on smaller claimants, with distributions prioritizing accounts held by those coined as the “convenience class”, or those with claims amounting to less than $50,000 who have completed their necessary pre-distribution requirements. These payouts will reportedly also include a 9% annual interest payment in addition to the claimed total.2 Payments for larger claims are expected to follow in the second quarter, marking the beginning of a much broader effort to return billions to creditors and traders impacted by the exchange’s failures. Under the bankruptcy plan, creditors are scheduled to receive roughly 119% of their adjudicated claim value.2
The appropriated funds are currently being distributed in U.S. dollars through digital asset firms BitGo and Kraken, respectively, with Kraken also distributing trading-fee credits to its users.2 For many investors caught in the crosshairs of the collapse, this marks a long-awaited first step toward recovering losses from the crypto-industry’s most infamous scandal seen to date.
OKX Pleads Guilty to AML Violations, Faces Over $500 Million in Penalties
On February 24, 2025, the United States Department of Justice (DOJ) announced that Aux Cayes Fintech Co. Ltd., the company behind one of the world’s largest cryptocurrency exchanges in OKX, pleaded guilty to operating an unlicensed money transmitting business in violation of current U.S. anti-money laundering (AML) laws. The Seychelles-based company agreed to pay penalties exceeding $504 million, including a criminal fine of $84.4 million and a forfeiture of $420.3 million, reflecting profits earned from its illicit operations in the U.S. market.
The plea, entered in the Southern District of New York, stems from OKX’s failure to register with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) as a money services business, in spite of serving U.S. customers since at least 2017. Prosecutors alleged that OKX facilitated over $5 billion in suspicious transactions from criminal proceeds, including laundering activities, due to its lack of adequate AML and know-your-customer (KYC) programs. The platform as a whole reportedly hosts billions of dollars’ worth of crypto transactions on a day-to-day basis across various global markets.
Inestigation into the firm’s activities over the past decade also revealed that it was not until May of 2023 that the exchange employed software to monitor suspicious activity or enforce sanctions compliance, despite actively targeting U.S. clients, including institutional traders conducting over $1 trillion in total transactions.2 Instead OKX bankrolled its operations on the hundreds of millions of dollars in profits from trading fees generated as a result of these activities. Reuters reports that company employees even went as far as to encourage customers to bypass trading restrictions, guiding potential customers to alter their residency information and respective areas of incorporation and provide additional inaccurate customer identification information to allow them to trade on the platform.2
Acting U.S. Attorney Matthew Podolsky emphasized that OKX “knowingly violated anti-money laundering laws for over seven years,” enabling criminals to exploit the U.S. financial system. As part of the plea deal, OKX committed to retaining an external compliance consultant through February 2027 and cooperating with ongoing investigations. This case underscores the Justice Department’s continued crackdown on cryptocurrency platforms skirting U.S. regulations, reinforcing that such entities cannot operate unchecked within American markets. Over the summer of 2024, popular crypto trading exchange BitMEX pleaded guilty to similar charges of multiple BSA violations and agreed to pay a $100 million penalty for their respective transgressions. OKX, which still maintains U.S. operations, now faces a costly reckoning for its years of non-compliance.
Citations
1. Rodrigues, Francisco. “FTX’s Initial $1.2B Payout Process to Creditors Is Underway.” CoinDesk, CoinDesk, 18 Feb. 2025.
2. Stempel, Jonathan. “US Says OKX Crypto Exchange Operator Enters $505 Million Guilty Plea.” Reuters, 25 Feb. 2025.