FTX's repayment could put nearly $17 billion into the pockets of creditors. Creditors will receive a cash payout for their crypto value when FTX crashes. The repayment ends two years of FTX bankruptcy.
The FTX bankruptcy saga that blew up the crypto industry two years ago — landing key figures including founder Sam Bankman-Fried in jail — is almost over.
A Delaware bankruptcy judge on Monday approved a plan to begin repaying consumers who lost money in the collapse.
The approved compensation package will see FTX creditors receive up to $16.5 billion in cash compensation for their losses.
Here's how and when they'll get their money back.
Less comfort
Almost all the affected customers will receive 119% of the cash value of their deposits from two years back, as per the repayment plan.
However, some FTX customers who lost their crypto deposits when the exchange collapsed are unhappy.
This is because the repayment will recognize the value of their crypto holdings in FTX when the exchange crashes. Bitcoin and Ethereum were trading at $20,000 and $1,200 when FTX broke.
Today, they have risen to $65,000 and $2,400, respectively.
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Creditors holding Solana in FTX were even bigger losers. Solana has risen sevenfold since its market crash during the FTX fiasco.
Some customers have complained that their crypto investments have lost the gains they made over the past two years.
Lenders holding stablecoin deposits are likely to be left unscathed because their value is pegged to the dollar.
Effective Date
With the judge's ruling Monday, creditors await an effective date for FTX's creditor repayment plan.
The date starts the clock for disbursement of funds to affected users.
Given FTX's global spread during its heyday, the repayment plan covers lenders in many countries.
This complicates the process.
“The estate is working to finalize arrangements for distribution to creditors in more than 200 jurisdictions around the world,” FTX's CEO and restructuring chief John Ray said in a statement on Monday.
Repayments to creditors must be made within 60 days, based on Monday's ruling, after the effective date of the payment plan is announced.
Customer Claims
The FTX Claims website has not yet been updated to show creditors payment options.
Approved creditors have previously filed claims during bankruptcy proceedings.
Those lenders provided customer identification documents and reviewed their FTX balances at the time the exchange went down.
Some account holders have also previously submitted tax forms for the claims filing process.
The repayment funds will come from money realized from the liquidation of FTX's assets, including the $900 million sale of its stake in Amazon-backed AI startup Anthropic.
Osato Awan-Nomayo Our Nigeria based DeFi representative. He covers DeFi and technology. To share tips or information about articles, please contact him here [email protected].
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