FTX Will Begin $16 Billion Repayments to Creditors Next Week
FTX is set to kick off the process of repaying creditors who were left in the lurch following the dramatic collapse of the once-thriving crypto exchange back in November 2022. The first phase of these repayments, focusing on what's termed as the "convenience class" creditors, those with claims under $50,000, is scheduled to start on February 18, 2025. These creditors are lined up to receive full payment of their adjudicated claims, sweetened with an additional 9% annual interest calculated from the date of the bankruptcy filing.
The Repayment Process
The distribution of funds will be managed through BitGo, though specifics on whether Kraken, another involved exchange, will adhere to this timeline remain undisclosed. This initial tranche aims to distribute between $6.5 to $7 billion, with the entire repayment plan pegged to exceed $16 billion if all claims are processed successfully.
Following a tumultuous period marked by bankruptcy proceedings and efforts to recover assets, FTX's reorganization plan was finally green-lit on January 3. The completion of this first repayment round is anticipated by early March, signaling a significant step in restoring some semblance of normalcy for those affected.
The crypto world watched in disbelief as FTX crumbled in just days due to a severe liquidity crisis. The dramatic fall led to the resignation of its founder and CEO, Sam Bankman-Fried, who later faced legal consequences for fraud, ending up with a 25-year prison sentence. By the end of 2024, legal proceedings against other key figures from FTX and its sister firm Alameda Research concluded, with sentences handed down to several executives including Caroline Ellison, Ryan Salame, Nishad Singh, and Gary Wang.
The approved reorganization plan promises that about 98% of creditors will receive at least 118% of their claim value in cash. This plan, which saw significant creditor support particularly from those with "dotcom customer entitlement claims," was lauded by Judge Dorsey as a benchmark for handling complex Chapter 11 cases. However, it's not without its detractors, who argue that the valuation of digital assets at the time of the petition, significantly lower than current market rates, does not fairly compensate for losses. Bitcoin, for example, was priced at $16,000 during the filing, starkly contrasting with its current valuation near $106,000.
Despite these criticisms, the logistical reality of lacking enough cryptocurrency reserves to distribute assets in kind was a point of contention highlighted by David Adler, representing some of the creditors. This marks a critical juncture for FTX, as it navigates through the aftermath of one of the most significant collapses in the crypto space, striving to make amends and restore trust.