✨ 98% of FTX Creditors Approved for 118% Payout in Cash
posted 8 Oct 2024
In November 2022, FTX, once one of the largest cryptocurrency exchanges, filed for bankruptcy. Estimates indicated the company owed approximately $11.2 billion to its creditors.
The reorganization plan was proposed in May 2024, more than two years after the collapse. Under this plan, creditors with claims under $50,000 will receive 118% of their claims, offering smaller creditors stronger protection.
The plan remained under review for four months before receiving approval from the court.
The plan guarantees that 98% of creditors will receive at least 118% of their claim value in cash.
I think this is a model case for how to deal with a very complex Chapter 11 proceedingsaid Judge John Dorsey.
The plan was backed by 94% of creditors in the "FTX Dotcom" class, 89% of "US customer entitlement claims," and 95% of the "Dotcom comfortable claims" group, representing $6.83 billion, $61 million, and $223.6 million in claims, respectively.
However, some criticism followed. One FTX victim, Sunil Kavuri, argued that payments should be in cryptocurrency rather than cash.
Kavuri stated that creditors might only receive 10–25% of the actual value of their cryptocurrency, as payouts are based on prices at the time of the bankruptcy filing when crypto prices were much lower than today.
Attorney David Adler supported this stance, arguing that cash payouts could impose additional tax liabilities on creditors.
At the time of FTX's collapse, Bitcoin (BTC) traded at $16,000. Today, its price is $62,000.
The payout process will commence within 60 days of the plan's activation, provided KYC and regulatory requirements are met. The total distribution is estimated to be between $14.7 billion and $16.5 billion.
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