The industry continues to grapple with the collapse of Sam Bankman-Fried’s FTX exchange. Hopefully, the long wait for former FTX cryptocurrency exchange users will soon end. After two years of being unable to access their funds, the failed exchange is preparing to distribute more than $1.2 billion in payments.
According to The cryptocurrency exchange is expected to start paying claims up to $50,000 after January 20, says Sunil, an FTX creditor and a member of the FTX Ad Hoc Client Committee, the largest group of more than 1,500 FTX creditors.
FTX Repayments
Initial distribution schedule
Claims less than $50,000 = $1.2 billion
January 20: FTX gave until January 20 to meet pre-distribution requirements for the initial distribution
Repayments will likely not begin before then
February 25: Possible (until March 4)
— Sunil (Champion FTX Creditor) (@sunil_trades) January 12, 2025
Exchange users who owe up to $50,000 in digital assets have until January 20 to fulfill their payment obligations. Sunil books, “January 20: FTX has given until January 20 to meet pre-distribution requirements for the initial distribution. Payment will likely not begin before then.
Notably, the repayment model reimburses claimants based on cryptocurrency prices at the time of bankruptcy. Creditors criticized the move, especially since many token prices have risen significantly since then. For example, Bitcoin has risen more than 370% since November 2022.
Implications of FTX Payment on the Crypto Industry
The cryptocurrency industry is already excited about the inauguration of US President-elect Donald Trump on January 20. This has led to expectations of increased regulatory clarity in the cryptocurrency sector and potential acceptance of Bitcoin law. The legislation proposes creating a Bitcoin reserve in the United States, the world’s largest economy.
Some industry observers believe that January 20 could trigger the next phase of the 2025 cryptocurrency market cycle, which could lead to Bitcoin surpassing $200,000 when combined with upcoming FTX payments.
According to the cryptocurrency exchange’s restructuring plan, which was approved in October 2024, 98% of FTX users can expect to receive 119% of the declared value of their funds.
Some cryptocurrency investors expect redemptions to increase market volatility.
In addition, there is also an expectation that the exchange’s creditors will behave similarly to Mt.Gox creditors, Who received a total of 59,000 bitcoins worth nearly $4 billion and did not sell them.
It is worth noting that in December, cryptocurrency companies BitGo and Kraken announced that they would support the distribution of refunds to users. If all users submit comprehensive claims, the exchange is expected to distribute approximately $16 billion.
FTX drama that never ends
Investors are still waiting to see if the cryptocurrency exchange will follow through on its word. Since the infamous crypto winter began, the exchange’s reputation has continued to suffer from various accusations.
FTX’s creditor, Linda Favario, has filed a complaint with the US Bankruptcy Court over the exchange’s executives’ lavish spending. Linda Favario called the court’s attention to the excess expenses in her letter dated December 17, 2024, noting that it is a common practice among bankruptcy professionals.
She explained: “My independent research indicates that these cases are not isolated, but rather part of a broader pattern of excessive and unnecessary spending that conflicts with the Department of Justice’s Guidelines for Review of Reimbursement Claims and Reimbursement of Expenses.”
Notably, Bankruptcy Judge John Dorsey raised similar concerns during a hearing on December 12, 2024. Dorsey highlighted three questionable expenses at that hearing, including an airline ticket worth $8,251, an Uber ride worth $134, and a meal in a hotel room worth $120.
Linda Favario asked the court to expand the scope of the expense review. It identified many exorbitant expenses and provided evidence to support them.
In addition, there have been claims that the bankruptcy estate of the exchange is strongly opposed to Backpack Exchange’s claim to acquire its EU arm. The Dubai-based exchange announced its $32.7 million acquisition of FTX EU to expand derivatives products, while FTX’s US estate claims to ownership of the European business remain unsettled.
Backpack claims to have bought FTX EU from insiders Patrik Groen and Robin Matzke, who allegedly concluded the deal in May. Payments were allegedly made in accordance with the terms of sale. Meanwhile, FTX ownership claims that FTX Europe AG still owns FTX EU shares and that the internal transfer has not occurred.
With all this going on, once FTX’s creditors get paid, there will be a sigh of relief. With this cryptocurrency exchange, you can never be 100% sure. If the repayments go ahead as planned, the industry will breathe a collective sigh of relief.
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