Key Takeaways
Rumors about FTX creditors getting a $16 billion payout this week are rife; however, contrary to what many influencer accounts on social media are peddling, the repayment might take longer than anticipated.
Despite reports of FTX reimbursements surfacing, the exchange’s reorganization plan is still pending court approval, with a hearing scheduled for Oct. 7, 2024.
And as per the plan, creditor reimbursements could take years.
FTX’s latest filing shows that the defunct exchange has set aside $230 million for shareholders, a departure from the usual practice of prioritizing creditor reimbursements.
What’s interesting is that most FTX shareholders are clients of Sullivan & Cromwell , the firm responsible for overseeing the bankruptcy restructuring.
FTX creditor activist Sunil Kavuri has spoken out about the repayment process, contradicting misinformation spread by large social media accounts.
According to Kavuri, the reimbursement timeline is longer than initially thought, with some creditors potentially waiting until the second quarter of 2025.
Kavuri noted that claim distribution for less than $50,000 will be processed first and might be completed by the end of this year. However, reimbursement will begin next year for claims higher than $50,000.
Here’s how the repayment process is expected to unfold:
FTX’s latest filing also revealed that creditors will only receive a fraction of their lost crypto assets.
Instead of being reimbursed the full value of their lost assets, creditors will receive the USD equivalent of the asset’s value at the time of FTX’s collapse in November 2022.
To put this into perspective, if a user has lost one Bitcoin, they won’t receive the token’s current value, which is above $65,000. Instead, they’ll receive the USD value of 1 BTC in November 2022, approximately $16,000—a quarter of its current value.
During the reorganization plan, there were rumors about potentially restarting the defunct exchange.
FTX’s court-appointed CEO, John J. Ray III, claimed that they had recovered most of the assets, and as the price of the crypto tokens went high, many joked that FTX might be able to repay more than what it lost in USD value.
The news is a bitter pill for creditors who had been hoping that FTX’s sudden surge in crypto prices would somehow lead to a full recovery of their losses.
Some optimists thought FTX might be able to pay back more than it owed in USD terms, thanks to the rising crypto market. But those hopes have been dashed.
Instead, creditors now face the harsh reality of a payout that’s just a fraction of what they’re owed— likely 10-25% of the original value.