Massive FTX Repayment Begins May 30: What Creditors Must Know

After more than two and a half years, former cryptocurrency exchange FTX is finally moving forward with significant distributions to users impacted by its collapse. If you were an FTX account holder, understanding the next steps in the FTX repayment process is crucial.

When Does the FTX Repayment Begin?

The FTX Recovery Trust announced on May 15 that it would commence the second phase of asset distribution. The critical date for the start of this FTX distribution is May 30, 2024. Funds are expected to be sent out to eligible parties within one to three business days following this date. This follows an initial distribution phase that began in February.

How the FTX Distribution Will Work

The estate plans to distribute more than $5 billion in this round. The funds will be disbursed through established crypto firms, specifically BitGo and Kraken. Not all account holders will receive funds in this particular phase; the distribution targets specific groups eligible under the approved reorganization plan. Further repayment schedules for subsequent groups of FTX creditors will be announced later.

Understanding FTX Creditor Payouts

Under the terms of the reorganization plan, five specific groups categorized as “convenience classes” are slated to receive a distribution ranging from 54% to 120% of their approved claim value. The estate has indicated that approximately 98% of FTX creditors are projected to receive at least 118% of their original claim value in cash during the overall process. This calculation is based on the value of assets at the time of the FTX bankruptcy filing in November 2022.

The FTX Bankruptcy Valuation Controversy

While the prospect of receiving funds is a relief for many, the reorganization plan has faced criticism regarding the valuation date used for claims. The plan bases reimbursements on cryptocurrency prices as of November 2022. Since that time, the market has seen significant appreciation, notably Bitcoin, which has risen substantially from around $20,000 to over $100,000 at the time of the original article’s publication. This means that while creditors may receive more than their original USD claim value from 2022, the amount might be significantly less if measured in the quantity of crypto they held or its current market value. This discrepancy remains a point of contention for many holding FTX claims.

Status of Related Criminal Cases

Alongside the civil recovery process, the criminal proceedings against key figures from FTX and Alameda Research have largely concluded. Former FTX CEO Sam Bankman-Fried was found guilty and sentenced to 25 years. Former Alameda CEO Caroline Ellison received a two-year sentence, and former FTX Digital Markets co-CEO Ryan Salame was sentenced to seven and a half years. Other former executives, including Nishad Singh and Gary Wang, pleaded guilty and received time-served sentences. While these cases provide a sense of closure on the criminal front, the focus for affected users remains firmly on the ongoing FTX repayment efforts.

Summary

The upcoming FTX distribution of over $5 billion starting May 30 marks a significant step in the lengthy recovery process for victims of the exchange’s collapse. While the distribution offers financial relief to many FTX creditors, the method of valuing FTX claims based on 2022 prices remains a point of debate, highlighting the complexities inherent in large-scale crypto bankruptcy proceedings. Account holders should monitor official announcements from the FTX Recovery Trust regarding the specific timeline and eligibility for receiving their funds.