- FTX bankruptcy estate is looking to start repaying its customers soon.
- The exchange has instructed affectees to begin submitting claims.
- Despite the positive news, claimants are unhappy with the payout structure.
It’s been nearly two years since the dramatic collapse of the now-defunct crypto exchange FTX, which left a $10 billion hole in the wallets of over nine million users. While claimants wait in limbo for reimbursement, a glimmer of hope emerges from the FTX bankruptcy estate as it signals confidence in eventually paying back its customers.
FTX Bankruptcy Estate Aims for Full Payment by Year-End
The FTX bankruptcy estate aims to start repaying its customers by the end of the year, as revealed in discussions from a meeting of FTX Digital’s Joint Official Liquidators in the Bahamas.
The estate is navigating through two parallel processes: the Chapter 11 bankruptcy filed in Delaware and the official liquidation process of FTX Digital, a Bahamas-based subsidiary of the exchange. Both wings of the estate have agreed to collaborate to ensure creditors can submit their claims to either entity and receive the full value they’re entitled to.
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According to notes from the meeting, the Chapter 11 Debtors and the Joint Official Liquidators "have a shared goal to make the first interim distribution by the end of 2024 to creditors with admitted claims and satisfactory KYC documentation.”
Creditors have been able to submit claims on the FTX’s claims portal since March 1, when the portal went live. Users have until May 15 to choose one of the two bankruptcy processes and submit a claim. However, the deadline is expected to be extended to at least June 2024, per the meeting.
While FTX’s announcement comes as a milestone achievement, its approach remains hard to swallow for most creditors.
FTX Users Unhappy With Chapter 11 Plan
In December 2023, the FTX Debtors’ Estate submitted a revised Chapter 11 plan outlining a proposal to repay victims based on the cash value of the digital assets held on the exchange at November 11, 2022 rates, the date of the bankruptcy.
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However, FTX creditors have contested the proposal, arguing that it was unfair due to a significant rise in crypto prices since the bankruptcy date. Solana, representing over 34% of FTX’s holdings, has skyrocketed by over 1600% to $200 since November 2022. Meanwhile, Bitcoin, representing 15% of the exchange’s holdings, has surged to a new all-time high, recording a gain of over 370% to $73,000.
Addressing user complaints, FTX attorney Andy Dietderich asserted that US bankruptcy was ‘very clear.’ He stated,
"I have no wiggle room on that. The Bankruptcy Code says what it says, and I am obligated to follow it."
On the Flipside
- FTX has recently suspended efforts to facilitate the revival of the exchange following unsuccessful bidding attempts with potential buyers.
- Sam Bankman-Fried was recently charged with 25 years of prison for his role in the FTX fiasco.
- FTX creditors alleged the exchange’s primary legal counsel actively participated in the fraud that affected the 9 million users.
Why This Matters
FTX claimants have been patiently awaiting reimbursement for nearly two years. While the announcement of repayment is undoubtedly welcome news, it also creates a dilemma, given the relatively unfair payout structure.
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