FTX Prepares Major Creditor Repayments Starting May 30 as Bankruptcy Nears Conclusion

After more than two years of legal and financial turbulence, FTX is gearing up to start repaying claims exceeding $50,000 on May 30, marking a significant milestone in the defunct exchange’s bankruptcy proceedings.

The process comes over two years later since the company’s high-profile collapse in November 2022, which sent shockwaves through the crypto industry. With a cash reserve of $11.4 billion, FTX is poised to address a portion of the massive creditor claims that have accumulated since the downfall. According to a Bloomberg report, bankruptcy attorney Andrew Dietderich indicated that these repayments will target major creditors, bringing the prolonged saga closer to resolution.

The scale of the claims is staggering, with Dietderich noting that FTX is contending with what he described as “27 quintillion” claims, many of which are considered fraudulent or questionable. Despite this complexity, the exchange has already begun disbursing funds to a select group of “convenience class” creditors.

These repayments are based on the value of digital currency holdings as of November 11, 2022, the date FTX filed for bankruptcy. While the company estimates that creditors will recover 118% of their claims in cash, this figure has sparked debate among those affected. The dramatic rise in cryptocurrency prices since that filing date has left some feeling shortchanged, as their repayments won’t reflect the current market value of their assets.

A Tale of Missed Gains and Partial Recovery

The disconnect between petition-date valuations and today’s market prices is a sore point for many creditors. Solana, for instance, has surged approximately 650% since November 2022, while XRP has climbed 450%. Bitcoin has seen its value soar by 500%, and even Ethereum, despite recent challenges, has risen nearly 47%.

Yet, creditors will receive cash repayments tied to the much lower prices from over two years ago. Sunil Kavuri, a spokesperson for FTX’s largest creditor group, acknowledged the mixed emotions surrounding the process. He described the repayments as a step toward closure for those impacted by the exchange’s collapse but emphasized that the use of outdated valuations means many won’t achieve full recovery in cryptocurrency terms.

To soften the blow, FTX is offering creditors an additional 9% annual interest rate on their claims during the waiting period. However, this incentive comes with pressure on the company to act swiftly. The repayment process, which could stretch over several months, is a logistical challenge given the volume of claims and the need to sift through potentially invalid submissions.