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 the first batch of creditors will occur within 60 days after that date.

The initial repayment distribution is limited to creditors classified as 'convenience class' in the reorganization plan. The convenience class refers to creditors with claims of $50,000 or less, and these investors account for over 90% of all creditors in the FTX bankruptcy case, expected to recover 118% of their claims in USD. The distribution dates for other classes of claims will be announced later.

Complete Steps 7 and 8 before 1/20

Today, officials officially announced that the reorganization plan is effective and reminded creditors in the 'convenience class' that to receive the initial repayment distribution, they must complete the pre-distribution requirements by January 20, 2025, including submitting tax forms (Step 7), selecting and successfully registering with a distribution service provider (Step 8), and passing sanctions screening. The complete steps are as follows:

  • Log in to the FTX claims portal website

  • Complete the required KYC verification before January 3, 2025.

  • Submit the required tax forms, including the W-8 BEN form.

  • After selecting the distribution service provider BitGo or Kraken in STEP 8, read the registration instructions for the chosen provider and register an account with BitGo or Kraken before January 20.

Officials stated that creditors who do not complete the requirements before the deadline will not receive distributions on the initial distribution date but may receive catch-up payments in subsequent months.

Additionally, according to Section 7.8 of the reorganization plan, if holders do not complete the pre-distribution requirements within six months from the initial distribution record date (January 3, 2025), they will lose their distribution rights.

At the same time, according to Section 7.14, if holders receive requests to complete the requirements, they must fulfill them within the specified period, or they will also lose their distribution eligibility.

How much compensation can creditors receive?

According to the FTX 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 USD price of the cryptocurrency on the day FTX filed for Chapter 11 bankruptcy on November 11, 2022.'

Although FTX expects that the vast majority of creditors (those with claims of $50,000 or less) will be able to recover 118% of their claims in USD, unless the assets held by users on FTX are stablecoins, they are likely to incur 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 around $16,000, but the current BTC price has surged to about $98,000. This means that if creditors had one Bitcoin on FTX at that time, they might only recover $16,000, which is about 16% of the current price, resulting in a significant loss.

Will FTX's repayments inject $16 billion into the crypto market?

Regarding the upcoming repayments from FTX, Quinten, co-founder of weRate, stated that this is a huge positive for the crypto market. He noted that FTX will start repaying creditors $16 billion from January 3 and expects to complete the repayments within 60 days. Quinten believes that a significant portion of these funds may flow back into the cryptocurrency market, fueling a bull market.

However, FTX's well-known 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 only for creditors in the 'convenience class', totaling $1.2 billion. For creditors with claims exceeding $50,000, a total of $10.5 billion will be paid later. He further pointed out FTX's overall asset profile:

  • Cash reserves: $13 billion

  • Venture portfolio and litigation proceeds: expected to be between $5 billion to $7 billion:

Sunil added that about 50% of the claims have been acquired by claim buyers, but these buyers are not interested in crypto assets, which may reduce the likelihood of funds flowing back into the crypto market.