FTX repayments are set to begin on February 18, 2025, for creditors in the convenience class, specifically those with claims under $50,000. This schedule has been communicated by the FTX Recovery Trust, with expectations that around $1.2 billion will be distributed to these smaller claim holders. The FTX Recovery Trust was established as part of the bankruptcy proceedings for FTX, the once-prominent cryptocurrency exchange that collapsed in 2022.
FTX filed for Chapter 11 bankruptcy in November 2022. The collapse was triggered by a massive withdrawal of funds by customers following reports that FTX’s sister company, Alameda Research, held a large amount of FTT, FTX’s own cryptocurrency token. This led to a liquidity crisis, revealing an $8 billion shortfall in FTX’s accounts. Sam Bankman-Fried resigned as CEO of FTX and was replaced by John J. Ray III, known for his role in the Enron bankruptcy, to oversee the company’s restructuring.
Multiple investigations ensued, with Bankman-Fried later being convicted of fraud and sentenced to 25 years in prison for defrauding FTX customers out of billions. Other executives, like Caroline Ellison and Gary Wang, pleaded guilty to related charges. The FTX estate managed to recover assets amounting to between $14.7 billion and $16.5 billion through various means, including selling off investments and recovering crypto assets.
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The Trust was set up to manage and distribute the assets recovered from FTX’s bankruptcy estate to its creditors and customers. According to various reports, the Trust aims to repay creditors, focusing initially on those with claims of $50,000 or less. The plan involves distributing recoveries from the sale of assets, including investments in tech companies and cryptocurrencies, as well as from litigation claims.
Distributions were anticipated to begin in early 2025, with specific dates mentioned for the convenience class (claims under $50,000) distributions set for February 18, 2025. The Trust has managed to recover between $14.7 billion and $16.5 billion, which is intended to be used for repayments. Creditors with claims of $50,000 or less were expected to receive about 118% of their claim value, based on the cryptocurrency prices at the time of FTX’s bankruptcy in November 2022, not current market values.
A bankruptcy plan was approved in late 2024, allowing for the repayment of creditors. The plan aimed to repay customers 118% of their claim value based on the crypto prices on the date of bankruptcy filing, not current market values, which has been a point of contention among creditors, there was a notable amount of customer funds, reported between $1 billion to $2 billion, that could not be accounted for initially.
One significant issue highlighted in discussions around the repayment plan is the discrepancy between the value of cryptocurrency at the time of bankruptcy versus its current value. Creditors are receiving payments based on lower 2022 prices, which has been a point of contention. The Trust has been using various channels to inform creditors about the progress and requirements for receiving distributions, including official statements.
The method of repayment, especially the “dollarization” of claims, where crypto holdings are converted to their dollar value at the time of bankruptcy, has been criticized by some creditors given the rise in crypto values post-bankruptcy.
Please note, while there is considerable excitement and anticipation around this news, the exact details and the process might still be subject to change or clarification as the date approaches. It’s advisable to keep an eye on official communications from the FTX Recovery Trust for the most accurate and up-to-date information.
