The weird insolvency of FTX, and its link to South Africa

Sasha Ivanov, the founder of the Waves blockchain, has spent the better part of four years living inside one of modern finance’s strangest afterlives: being pursued by the bankruptcy managers of a company that blew itself to pieces in 2022 and now has enough money to pay many creditors not just in full, but beyond full.

That is an odd sentence. It is also the whole problem.

Ivanov’s issue is an extreme version of a problem being faced by both debtors and creditors in South Africa’s business rescue system. That is, when the people supposedly doing the rescue delay and extend the process so much that the only organisation getting rescued is them.

In Ivanov’s telling, Alameda Research – the organisation associated with Sam Bankman-Fried’s bitcoin depositary FTX, deposited about $90m into the Waves ecosystem. It then borrowed the WAVES native cryptocurrency, tried to short it and got trapped after governance decisions blocked withdrawals.

The clawback

In an interview with Currency, Ivanov says the FTX estate later arrived to claw the money back through US litigation. Those are his allegations, and they sit against the estate’s own lawsuit, which accused Ivanov of misconduct over roughly the same pot of money. It’s not only organisations like Waves that are in the sights of FTX’s insolvency lawyers. They are also going after the charitable and political donations made by Sam Bankman-Fried, then CEO of FTX.

FTX was founded in 2019 by Bankman-Fried and Gary Wang, and filed for chapter 11 bankruptcy in 2022 after massive fraud was uncovered. At its height, it had more than 1-million users, was the third-largest digital currency exchange in the world, and had a valuation of $32bn. 

The larger point Ivanov makes is not really about whether he wins or loses. It is about what the process has become. “They paid you in dollars,” he says of FTX customers, based on the value of their bitcoin as of 2022. Now, the insolvency lawyers are “just trying to pay themselves the fees”. His proposed fix is blunt: “They have to pay [customers] their assets back, not dollars.” In other words – pay people their bitcoin, not what their bitcoin was worth in dollars at 2022’s prices.

He is hardly alone in spotting the absurdity. Other FTX customers objected because US bankruptcy law fixed their claims at November 2022 prices, even as crypto rebounded sharply afterwards. Reuters has reported that customers felt “short-changed” by being repaid on that earlier, much lower basis.

Extraordinary recoveries

And the estate, thanks to asset recoveries, settlements and the crypto rebound, has since become rich enough to promise extraordinary recoveries: FTX said in 2024 that 98% of creditors would receive at least 118% of allowed claims in cash, and by the fourth distribution announced for March 31 2026, convenience claims had reached 120%.

It could do that because it has paid creditors based on the value of their cryptocurrency at the time of FTX’s bankruptcy, when bitcoin was trading at just over $17,000. Bitcoin is currently four times more valuable, trading at about $76,000.

In a nutshell, the company was bankrupt enough to freeze customers at the bottom, but prosperous enough in liquidation to create a surplus estate at the top.

That is where this stops being a crypto freak show and starts looking eerily familiar to South Africans. South African law, at least in theory, is nobler. Chapter 6 of the Companies Act says one of the purposes of the act is to “provide for the efficient rescue and recovery of financially distressed companies, in a manner that balances the rights and interests of all relevant stakeholders”.

Business rescue is defined as proceedings to facilitate rehabilitation through temporary supervision, a moratorium on claims, and a rescue plan. The official aspiration is clear enough: save viable businesses, preserve value and do better than liquidation.

The South African case

The trouble, in practice, is that South African business rescue has also developed a taste for duration, opacity and professional metabolism. The Companies and Intellectual Property Commission warned in an October 2024 practice notice that it had observed entities sitting in business rescue for more than five years without any plan having been adopted.

That is not rescue; that is storage. Currency noted the same pathology last year, warning that some companies spend years in rescue while cash slowly erodes. The line in that piece was devastating because it sounded so ordinary: “No-one wants to put more money in; everyone wants something out.”

The South African Post Office is the most state-shaped example of the genre. By March 2025, more than R207.4m had been spent on the Post Office business rescue process, according to figures discussed by the business rescue practitioners (BRPs); by the end of September 2024, TimesLive reported the bill at about R176m, of which the BRPs themselves accounted for R6.73m and consultants for R144m, excluding VAT.

Yet this was attached to a rescue in which creditors had agreed to accept 12c in the rand, thousands of staff were retrenched, and the entity was still asking for further state support to implement the plan. Parliament’s select committee, briefed in June 2025, sounded strikingly like a group of people who had finally read the invoice: one member said “too much money is required to pay creditors” and it was unclear how value would be transferred to ordinary people and employees; another asked what had happened to the rest of the government money.

Fighting over the scraps

There are other South African versions of the same movie. In airline Comair’s case, former CEO Wrenelle Stander complained that the process was expensive and rushed, that bankers “benefited most”, and that once the airline’s lawyers, shareholders’ lawyers and the BRPs were counted, fees reached about R75m.

In Mango’s amended rescue plan, concurrent creditors were initially offered only about 4.43c in the rand, with the balance of their claims then potentially ceded to an investor. That is a long way from rehabilitation and rather close to a legal mechanism for rearranging who gets to own the scraps.

To be fair, not every rescue is a parasitic farce. SAA is the obvious complicating example. Its BRPs were heavily criticised on fees; Pravin Gordhan disclosed that they had been paid R36m in six months, while outside advisers also ran up substantial bills. But SAA did eventually emerge from rescue, resume flying, and shed a huge amount of compromised debt.

The lesson is not that practitioners are always profiteers. It is that rescue law creates a standing temptation: when time is money and process has a tariff, the process itself can become the client.

That is why the link between FTX and South African business rescue is tighter than it first appears. In FTX, the distortion came from applying old insolvency rules to volatile digital assets, freezing customers at 2022 dollar prices and then letting the estate harvest the rebound.

A banquet of consultants

In South Africa, the distortion is different but rhymes: moratoria, prolonged proceedings, consultant entourages and patchy oversight can mean that distressed companies become habitats for professionals long after they have ceased to be plausible candidates for salvation. One system locks in value too early; the other sometimes takes too long to admit that the value has already gone. In both, the scandal is the same: the law begins by promising to protect stakeholders and ends by creating a process with its own appetite.

Ivanov, whatever happens in his case, has put his finger on the uncomfortable question. What is insolvency law for once the victims are no longer the obvious beneficiaries of the procedure?

In crypto, the answer now looks worryingly like this: to convert coins into claims, claims into cash, cash into fees, and fees into more processes. In South Africa, business rescue can sometimes look like the same trick in a more familiar suit. The Post Office is rescued but still gasping. Mango is rescued, but creditors are eating crumbs. SAA is rescued, until it isn’t. And somewhere in the middle of all that, the rescuers send another bill.

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_{Top image: Rawpixel/Currency collage.}