Bahamas-based FTX Digital Markets is set to begin creditor repayments in February, following their loss access to funds after the exchange's collapse in November 2022. The initial distribution will be made on February 18 for creditors with claims under $50,000.
FTX Creditor Repayments
According to FTX creditor Sunil Kavuri, creditors within the 'convenience class' with claims under $50,000 will receive full repayment of their adjudicated claims along with 9% interest per annum since the bankruptcy filing in November 2022. Payments will be processed through BitGo, though it remains uncertain if Kraken, another platform assisting in fund distribution, will follow the same schedule. If all claims are successfully processed, FTX is expected to pay over $16 billion to creditors.
Reorganization and Legal Proceedings
After years of bankruptcy proceedings and asset recovery efforts, FTX's reorganization plan officially took effect on January 3. The first round of repayments is expected to be completed by early March. Once one of the largest crypto exchanges, FTX collapsed in November 2022 after a liquidity crisis. Former CEO Sam Bankman-Fried resigned and was convicted of fraud, receiving a 25-year sentence. By the end of 2024, criminal cases against four other executives of FTX and Alameda Research were resolved, including former Alameda CEO Caroline Ellison and former FTX Digital Markets co-CEO Ryan Salame.
Reactions and Criticisms of the Plan
Under the plan, 98% of creditors will receive at least 118% of their claim value in cash. About 94% of creditors in the 'dotcom customer entitlement claims' class representing around $6.83 billion in claims approved the reorganization. The plan, approved by a U.S. judge, faced some criticism from creditors, particularly concerning payout calculations based on digital asset prices at the petition date. Nevertheless, lawyer David Adler noted that FTX lacked the necessary cryptocurrency reserves for in-kind distributions.
Despite some objections, FTX's creditor repayment process is moving forward. The FTX situation has served as a model case for complex bankruptcies and restructuring plans in the cryptocurrency exchange sector.
