As the FTX saga continues to unfold, creditors of the troubled cryptocurrency exchange are nervously waiting to receive compensation following the platform’s dramatic collapse in November 2022.
Creditor activist Sunil Kavuri recently suggested that affected parties may be able to recover 10% to 25% of their holdings. This estimate comes as stakeholders grapple with the ongoing restructuring process and a court hearing scheduled for October 7 that will determine the nature of the payment — whether it will be in cryptocurrency or cash.
To make matters worse, FTX recently transferred $230 million (about 18% of its seized assets) to equity holders, further unsettling creditors who were already concerned about the fairness of the restructuring plan.
Kavuri expressed skepticism about the projected recovery rates, stressing that the figures are rough estimates and could fluctuate depending on current market conditions.
Rumor has it that FTX could begin distributing up to $16 billion to creditors as early as October, but this would still depend on court approval of the restructuring plan.
The plan itself has faced considerable opposition. A $12.7 billion repayment agreement was previously approved, but the court has banned the FTX exchange and its sister company Alameda Research from trading digital assets.
The U.S. Trustee has also sounded the alarm, advocating for a more equitable distribution among creditors. Even within the creditor community, dissent is brewing over terms that are seen as favoring equity holders at the expense of their clients.
At the heart of the dispute are broad discharge provisions and the lack of an “in-kind” distribution option, which creditors argue would reduce the tax burden associated with cash payments.
The U.S. Securities and Exchange Commission (SEC) responded to these concerns by requiring modifications to the plan and warning of disapproval if the necessary changes were not made.
On the market side, FTX still holds over $1 billion in Solana tokens, and any liquidation of these assets could have an adverse impact on Solana’s market value. Conversely, if payments were to begin, it could inject new money into Bitcoin and altcoins, potentially sparking major price moves across the crypto space.
It should be emphasized that this article is for reference only and does not constitute investment advice.
