FTX rumored to start repayment on 9/30, "FTT skyrocketed by 80%", fact check: The plan has not been approved by the court and will be launched as soon as the end of the year

Table of Contents - Creditors Oppose Compensation Plan - FTX Plans to Allocate $230 Million to Shareholders, Angering Creditors - FTT Surges The bankrupt cryptocurrency exchange FTX's restructuring team announced last month that creditors had overwhelmingly voted to approve their repayment plan. The FTX liquidation team will submit the final voting results to the U.S. Bankruptcy Court in Delaware before the confirmation hearing scheduled for October 7, and the plan is expected to be approved by the court within 60 days. However, social media has been rife with rumors that the FTX restructuring team will begin making payments to creditors and customers on September 30, but these are false claims, as the repayment plan has not yet been approved by the court. Cointelegraph reported that U.S. Bankruptcy Court Judge John T. Dorsey in Delaware will preside over the confirmation hearing for the repayment plan on October 7. If the plan is approved, small creditors with claims under $50,000 may start receiving compensation by the end of 2024, while larger creditors may have to wait until the first or second quarter of 2025. Creditors Oppose Compensation Plan According to the restructuring team's current plan, FTX will repay creditors in cash or dollar-pegged stablecoins. It is estimated that after selling all assets, FTX will have $14.5 billion to $16.3 billion in cash available for distribution, while it owes approximately $11.2 billion to customers and other non-governmental creditors. FTX had previously stated that the vast majority of users (those who held funds under $50,000) would receive around 118% in cash compensation. However, this compensation is calculated based on the platform's funds on the day FTX filed for bankruptcy under Chapter 11, so unless the user's assets were in stablecoins, they will still suffer significant losses. For example, if a user held one BTC on FTX when the bankruptcy petition was filed, the price was only around $16,000, but the current price is close to $66,000, meaning the user would only receive $16,000, less than 25% of the current value. Therefore, the FTX creditors' committee led by Sunil Kavuri has opposed the repayment plan for several reasons, including demanding compensation in the form of actual cryptocurrency and opposing cash payments, as this would result in tax obligations. However, FTX's lawyers insist that creditor compensation must be paid in cash to avoid conflicts with the current Chapter 11 bankruptcy law and to facilitate the restructuring process. FTX Plans to Allocate $230 Million to Shareholders, Angering Creditors Additionally, The Block reported that in recently disclosed court documents, FTX has reached an agreement to allocate up to $230 million from the proceeds of government forfeiture actions to repay certain shareholders, which has angered creditors. Typically, in bankruptcy proceedings, creditors have priority over shareholders in receiving compensation, and the creditors were not aware of this agreement when they voted to approve the repayment plan on August 16. According to the agreement, the FTX debtors' asset management team led by the law firm Sullivan and Cromwell will allocate 18% of all proceeds from government forfeiture actions to a dedicated fund for the "exclusive benefit of certain shareholders," totaling $230 million. The agreement was officially signed on August 28 but was not disclosed to the public until September 27. FTT Surges Notably, Forbes analyzed that FTX is expected to return $11 billion to $16 billion to creditors in the fourth quarter of 2024, which could be a significant positive for the cryptocurrency market. If the restructuring plan is approved, FTX will have 60 days to distribute the assets to creditors, meaning the returned cash could start reaching creditors by December 7, and they may reinvest the funds in favored tokens or ETFs. Perhaps influenced by the reports of FTX's planned $16 billion distribution to creditors in Q4 and the social media rumors of a September 30 start date for repayments, FTT surged dramatically last night, reaching a high of $2.71, a gain of over 80%. It is currently trading at $2.41, up over 70% in 24 hours. Concurrently, other bankruptcy-related tokens have also seen significant gains, with USTC up 25.04%, LUNA up 8.90%, and LUNC up 10.00% in the past 24 hours.