Collapsed cryptocurrency exchange FTX has announced the commencement of payouts to users with claims below $50,000, marking a significant step in its recovery process.
According to a recent announcement, these creditors will receive approximately 119% of their adjudicated claim value, which includes an annual interest rate of 9% accrued since November 2022.
Kraken And BitGo Facilitate FTX Fund Distributions
Under FTX’s recovery plan, 98% of creditors are expected to receive at least 118% of their claim value in cash. The repayment process is being facilitated by two crypto exchanges, Kraken and BitGo, which are converting the payouts into US dollars.
However, to participate in this distribution, creditors must complete Know Your Customer (KYC) verification, submit the required tax forms, and onboard with either BitGo or Kraken.
Users on the FTX subreddit have already reported receiving funds in their Kraken accounts, inclusive of the additional interest. For creditors with claims exceeding the $50,000 threshold, payouts are slated to begin in the second quarter of 2024.
The next scheduled distribution will occur on May 30, targeting holders of allowed claims categorized as “Class 5 Customer Entitlement Claims” and “Class 6 General Unsecured Claims.”
This group includes customers who had assets on the FTX platform when it collapsed, as well as other creditors like vendors and trading partners.
Sunil Kavuri, an FTX creditor and advocate, noted that creditors must have verified their claims by the record date of April 11 to qualify for the upcoming distribution. FTX estimates that the total value of the May distribution will range between $14.5 billion and $16.3 billion.
Customer Discontent Lingers
John J. Ray III, the plan administrator of the FTX Recovery Trust, expressed gratitude to customers and creditors for their patience and cooperation throughout this complex process. “Our work is not over — we intend to continue our recovery efforts and return funds to additional claim classes,” he stated.
FTX’s recent repayment announcements come four months after a court approved the full repayment plan. The exchange filed for bankruptcy in November 2022 after co-founder Sam Bankman-Fried shut down the platform and transferred control to insolvency experts.
Bankman-Fried misappropriated customer funds to cover risky bets made by his hedge fund, Alameda Research. In March 2024, he was convicted of fraud and sentenced to 25 years in prison.
The court granted FTX permission to utilize its recovered assets, valued at approximately $16.5 billion, to repay customers before addressing competing claims from government regulators.
Additionally, FTX is in discussions with the US Department of Justice regarding $1 billion in assets seized during Bankman-Fried’s trial. As per court documents, shareholders will receive up to $230 million, a significant departure from what they would typically expect in a standard bankruptcy scenario.
Despite these developments, some customers have expressed dissatisfaction with the repayment plan, lamenting that FTX’s collapse prevented them from benefiting from the resurgence in cryptocurrency prices since 2022.
The collapsed exchange clarified that returning the original crypto assets was not feasible, as they had been misappropriated by Bankman-Fried. At the time of its bankruptcy filing, FTX reportedly held only 0.1% of the Bitcoin that customers believed they had deposited on the platform.
At the time of writing, FTT was trading at $1.93, with losses of up to 7% over the month, but slight gains of 12% year-to-date.
Featured image from DALL-E, chart from TradingView.com
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