Defunct crypto exchange FTX has been undergoing a long and challenging process following its dramatic downfall. Today, it will begin repaying creditors, with $16 billion earmarked for distribution. This marks a significant milestone for creditors eager to reclaim their assets.
In December, the FTX estate, overseeing the bankruptcy proceedings of the defunct crypto exchange, announced plans to initiate repayments within 60 days of the effective date.
The estate anticipates total distributions to fall between $14.7 billion and $16.5 billion, but the initial payout will be more modest, prioritizing convenience classes with approved claims of $50,000 or less.
These creditors are projected to receive around 119% of their approved claim value, covering both principal and accrued interest, within 60 days. This first phase of repayments is estimated to total approximately $1.2 billion.
In a post on X, Sunil Kavuri, a well-known advocate for FTX creditors, announced that creditors exceeding $50,000 will receive a portion of a $10.5 billion fund. However, the timeline for distributing these funds to this group will be extended.
Key Requirements For Eligibility
To effectively execute the distribution exercise, crypto exchanges BitGo and Kraken have been appointed to oversee the initial payouts to retail and institutional customers in eligible jurisdictions.
He also noted that FTX customers must complete KYC verification, submit tax forms via the FTX Debtors’ Customer Portal, and select either BitGo or Kraken as their distribution manager. Customers and creditors must fulfill these requirements before the distribution record date to qualify for a payout on the initial distribution date.
Analysts also anticipate that $2.4 billion could return to the crypto markets following the plan’s implementation. They point out that credit funds, unlikely to reinvest in crypto, hold $3.9 billion of the total claims. Furthermore, 33% of the remaining claims are associated with sanctioned countries, insiders, or individuals lacking KYC verification, potentially preventing them from accessing the funds.
FTX Exchange Files For Bankruptcy
FTX, once a leading global crypto exchange, filed for bankruptcy in November 2022 following revelations of financial mismanagement and alleged fraud by its executives. The collapse triggered a cascade of market instability, leaving hundreds of thousands of users and institutional investors scrambling to recover their funds.
Following the bankruptcy filing, a court-appointed restructuring team to ensure a smooth transaction. The repayment process will be executed in several tranches to ensure seamless distribution. Creditors will receive fiat and crypto funds, depending on their claims and preferences.
