FTX 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.

FTX’s bankruptcy estate has received over $11 billion in creditor claims, setting the stage for potential payouts to creditors who lost funds in the exchange's collapse. However, misinformation and speculation have muddled the process, leading to false rumors regarding the timing and nature of these payouts.

According to court documents filed on September 27, the estate has received 105,000 claims from creditors, totaling $11.4 billion. These claims include both secured and unsecured debts, ranging from large institutional creditors to individual customers who lost funds on the exchange.

The estate's reorganization plan outlines a framework for paying these creditors, prioritizing smaller claims for faster distribution. If the plan is approved by the court, creditors with claims under $50,000 may begin receiving cash payments by late 2024. Meanwhile, those with larger claims could face a longer wait, potentially receiving payments in early or mid-2025.

However, the fate of these claims will be determined at a court hearing on October 7, where Judge John T. Dorsey of the U.S. Bankruptcy Court for the District of Delaware will consider the reorganization plan. If sanctioned by the court, the plan will pave the way for creditors to start receiving payments.

The bankruptcy proceedings have also seen a group of creditors, represented by Sunil Kavuri, advocating for payments in cryptocurrency rather than cash. They argue 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 FTX's bankruptcy filing, Bitcoin was trading around $16,000, whereas it currently hovers near $63,000. Under the current cash payout plan, a creditor who lost 0.5 BTC would receive $8,000, significantly less than the $32,000 they would obtain if paid in Bitcoin, given its price at the time of the exchange's collapse.

FTX Token (FTT) Surges on False Rumors of Imminent Payouts

FTX Token (FTT), the native cryptocurrency of the bankrupt exchange, experienced a surge in buying interest as rumors spread about即将进行的compensation payments to creditors. This news pushed the FTT coin up by over 70%, briefly hitting $2.70 on September 29, notching its highest level since March 2024, according to CoinGecko.

The coin, which was trading around $1.40 in previous weeks, spiked sharply before retreating to $2.10 by September 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 surge followed false claims of compensation payments starting soon. As BiZBytes highlighted on X, creditors face a much longer process. The next court hearing won't happen until November 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

The bankruptcy estate's reorganization plan also reveals that FTX will allocate $230 million from government forfeiture funds to preferred shareholders. This 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, to be distributed once the debtors' Chapter 11 plan is substantially consummated.

Meanwhile, FTX's attorneys argue that cash payouts are necessary to avoid delays and adhere to bankruptcy regulations. With the critical court date of October 7 approaching, both creditors and market observers are keeping a close eye on how these developments might influence the broader cryptocurrency landscape.