FTX Claims Bankruptcy Creditors
FTX’s bankruptcy estate has garnered over $11 billion in FTX claims from creditors, muddled by misinformation and speculation. Despite rumors that payouts might commence on Sept. 30, the estate has clarified that no distributions will occur until after a critical court decision on the restructuring plan.
Creditors Could Start Receiving Payments in Late 2024
The fate of the FTX claims under the reorganization plan will be determined at a court hearing on Oct. 7, overseen by Judge John T. Dorsey of the U.S. Bankruptcy Court for the District of Delaware. If the plan is sanctioned, creditors holding claims under $50,000 might start receiving cash payments by late 2024. Those with larger FTX claims may have to wait until early or mid-2025.
FTX reorganization plan documents. Source: Crypto Rover
FTX’s plan outlines that 98% of creditors will get at least 118% of their claims in cash. Dotcom customers could receive up to 142%. Yet, not all creditors are happy. Sunil Kavuri, representing a group of creditors, wants payments in crypto rather than cash. He argues that in-kind payments would better reflect the current value of assets like Bitcoin, which has surged since FTX’s bankruptcy. At the time of filing, Bitcoin was around $16,000, but today it trades near $63,000.
Under the current cash payout plan, a creditor who lost 0.5 BTC would receive $8,000 instead of the $32,000 they’d get if paid in Bitcoin.
FTX Coin (FTT) Surges on False Rumors
FTX Token (FTT), the native cryptocurrency of the bankrupt exchange, saw bullish action as rumors of imminent distributions spread. FTT coin surged by over 70%, briefly hitting $2.70 on Sept. 29, its highest level since March 2024, according to CoinGecko.
FTT 1- week chart. Credit. CoinMarketCap
The coin, which traded around $1.40 in previous weeks, spiked sharply before retreating to $2.10 by Sept. 30. While still up 30% in the past 24 hours, the token’s price volatility reflects the uncertainty surrounding FTX’s bankruptcy proceedings.
The price spike followed false claims of compensation payments starting soon. As BiZBytes pointed out on X, creditors face a much longer process. The next court hearing won’t happen until Nov. 7, and creditors may only recover 10-25% of their funds in crypto. Some could wait until the second quarter of 2025 for distributions to begin.
Potential Market Impact of FTX Claim Payouts
Markus Thielen, founder of 10x Research, predicts that the FTX payouts could boost the market by injecting $5 billion to $8 billion, potentially driving up cryptocurrency prices. Dan Held also noted that $16 billion from FTX distributions might soon enter the market, indicating that creditors might reinvest these funds rather than withdrawing them entirely.
FTX Distributes $16B: Creditors Poised for Major Buyback. Source: Dan Held
The FTX reorganization plan document further reveals that the defunct crypto exchange will allocate $230 million from government forfeiture funds to preferred shareholders. The agreement, executed on August 28 and disclosed on September 27, mandates that FTX debtors allocate 18% of all government forfeiture proceeds to a special shareholder fund.
FTX’s attorneys assert that cash payouts are crucial to prevent delays and adhere to bankruptcy regulations. With the critical court date of October 7 approaching, both creditors and market observers are keenly watching how these developments might influence the broader cryptocurrency environment.
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