FTX announced that its reorganization plan officially took effect yesterday (3rd), and the first batch of repayment distributions will be issued within 60 days, targeting 'convenience class' creditors with claims under $50,000. To receive the first batch of repayments, creditors must complete tax form submissions, choose, and successfully register a distribution service provider by January 20.
The bankrupt exchange FTX announced last December that its reorganization plan, approved by the court last October, will officially take effect on January 3, 2025, and the initial repayment distribution for creditors will occur within 60 days after that date.
Initial repayment distributions are limited to creditors categorized as 'convenience class' in the reorganization plan. The convenience class refers to creditors with claims of $50,000 or less, who make up over 90% of all creditors in the FTX bankruptcy case and are expected to recover 118% of their claim value in cash. The distribution dates for other classes of claims will be announced later.
Complete steps 7 and 8 by January 20.
Today, the official announcement of the reorganization plan took effect, and it reminded that to receive the initial repayment distribution, 'convenience class' creditors must complete pre-distribution requirements by January 20, 2025, including submitting tax forms (step 7), choosing and successfully registering a distribution service provider (step 8), and passing sanction reviews. The complete steps are as follows:
Log in to the FTX claims portal (https://claims.ftx.com) (for customers).
Complete the required KYC verification by January 3, 2025. (Please refer to the FTX claims application tutorial on Dongqu.)
Submit the required tax forms, including the W-8 BEN form. (Please refer to the tax return submission tutorial on Dongqu.)
After selecting the distribution service provider BitGo or Kraken in STEP 8, read the registration instructions for the selected service provider and register an account with BitGo or Kraken by January 20.
Officials stated that creditors who do not complete the requirements before the deadline will not be able to receive distributions on the initial distribution date, but may receive retroactive payments in subsequent months.
Additionally, according to Section 7.8 of the reorganization plan, if a holder has not completed the pre-distribution requirements within six months from the record date of the initial distribution (January 3, 2025), they will lose their distribution rights.
At the same time, according to Article 7.14, if the holder receives a request to fulfill the requirements, it must be completed within the specified time frame, otherwise, the allocation eligibility will also be lost.
FTX claims official website
How much compensation can creditors receive?
According to FTX's bankruptcy plan, the company estimates that there will be up to $14.5 billion to $16.3 billion in cash available for distribution. This plan applies to 98% of creditors, and repayments are calculated based on the dollar price of cryptocurrency on the day FTX filed for bankruptcy under Chapter 11 on November 11, 2022.
Although FTX expects that the vast majority of creditors (claims of $50,000 or less) will be able to recover 118% of their claim value in cash, unless the assets held on FTX are stablecoins, it is likely that they will still face significant losses.
Bitcoin has surged over 500% since FTX's bankruptcy.
For example, when FTX filed for bankruptcy protection, the price of BTC was only about $16,000, but the current BTC price has skyrocketed to about $98,000. This means that if creditors held one bitcoin at FTX at that time, they might only get back $16,000, which is about 16% of the current price, indicating a significant loss.
Will FTX's repayments inject $16 billion into the cryptocurrency market?
Regarding the news of FTX's upcoming repayments, weRate co-founder Quinten stated that this is a significant positive for the cryptocurrency market. He pointed out that FTX will begin repaying $16 billion to creditors starting January 3 and expects to complete the repayments within 60 days. Quinten believes that a large portion of the funds may flow back into the cryptocurrency market, fueling the bull market.
However, FTX's notable creditor Sunil immediately responded, clarifying that repayments will not start on January 3. He pointed out that the first repayments are expected to wait until February to March 2025 and are only for 'convenience class' creditors, totaling $1.2 billion. For creditors with claims exceeding $50,000, a total of $10.5 billion will be paid in subsequent distributions. He further outlined FTX's overall asset profile:
Cash reserves: $13 billion
Venture capital portfolio and litigation proceeds: expected to be between $5 billion and $7 billion.
Sunil added that about 50% of the claims have been acquired by claims buyers, but these buyers are not interested in crypto assets, which may reduce the likelihood of funds flowing back into the cryptocurrency market.
