An important milestone has been attained in the long and complex bankruptcy saga of the collapsed cryptocurrency exchange FTX. Another round of distributions, totaling about $1.6 billion, will initiate on September 30, representing the third meaningful distribution to creditors after the company’s high-profile collapse in November 2022. The move is another step in the FTX bankruptcy estate’s ambitious plan to return a substantial portion of the funds to those who lost money.
Payouts by the Numbers: Who Gets What?
This distribution follows two previous rounds, which have collectively returned over $6 billion to creditors. According to a recent announcement from the FTX Recovery Trust, the third payout will be routed through established financial service providers such as BitGo, Kraken, and Payoneer. Payments are expected to land in accounts within three business days for creditors who have completed the necessary verification steps.
The payouts vary depending on the creditor class. U.S. customers are set to receive a 40% distribution in this round, bringing their total recovery to an impressive 95% of their original claim. “Dotcom” customers, who used the exchange’s international arm, will see an additional 6% payout, raising their cumulative distribution to 78%. General unsecured and digital asset loan claims are slated for a 24% payout, bringing their total recoveries to 85%. In a noteworthy development, smaller “convenience claims” are being paid out at 120%, exceeding the face value of what was owed.
The Great Valuation Debate
The recovery rates may speak to the careful work of the FTX restructuring team, but this is not without its complications. For creditors, one of the areas of contention is asset valuation. The bankruptcy plan approved by the court states that claims are estimated based on the values of the assets before FTX’s collapse in November 2022. In effect, creditors are receiving cash payouts equal to only a small percentage of the market value of the digital cryptocurrency they would be holding today after the recent market improvement. Creditors have shared their frustration and feelings of missed opportunity considering the massive losses the digital assets represent.
The Road to Recovery
Repaying this high percentage of creditors is an unusual success story in bankruptcy of this nature. This accomplishment is due, in part, to a large effort at asset recovery implemented by CEO John J. Ray III, who took the position after founding developer Sam Bankman-Fried left the business. The team has worked to rebuild the exchange’s financial records from the ground up, a task complicated by a near-total lack of proper accounting. The funds being distributed come from a variety of sources, including liquidating recovered assets and selling off strategic investments, such as FTX’s valuable stake in the AI startup Anthropic.
Looking Ahead: A Glimmer of Hope
The third distribution is bringing thousands of victims and institutions hope. The deliberate and methodical path to asset recovery and the ability to go through a complicated legal and regulatory process makes the FTX case a “template” for future crypto insolvencies, according to U.S. Bankruptcy Judge John Dorsey. While there will be further delays in closing down the estate of FTX, there will be, however, additional, although smaller, distributions. The most recent distribution only reinforces the commitment to making victims whole as far as possible and is a necessary step in rebuilding a level of trust and stability in an industry that is still dealing with the aftermath of one of its largest failures.
