The bankrupt exchange FTX announced in December last year that its reorganization plan approved by the court in October last year will officially take effect on January 3, 2025, and the first distribution of payments to creditors will be made within 60 days after that date.
The initial distribution of payments is limited to creditors in the "convenience class" of the reorganization plan. The convenience class refers to creditors with claims of $50,000 or less, and these investors account for more than 90% of all FTX bankruptcy creditors, and are expected to recover 118% of the value of their claims in USD. The distribution dates for other classes of claims will be announced later.
Complete Steps 7 and 8 before 1/20
Today, the official announcement of the effective reorganization plan reminds that in order to receive the initial distribution of payments, creditors in the "convenience class" must complete the pre-distribution requirements by January 20, 2025, including submitting tax forms (Step 7), selecting and successfully registering with a distribution service provider (Step 8), and passing sanctions review. The complete steps are as follows:
- Log in to the FTX claims portal website ( https://claims.ftx.com ) (for customers).
- Complete the required KYC verification before January 3, 2025. (See BlockTempo's FTX Claims Portal Tutorial)
- Submit the required tax forms, including the W-8 BEN form. (See BlockTempo's Tax Form Submission Tutorial)
- After selecting BitGo or Kraken as the distribution service provider in STEP8, read the registration instructions of the selected service provider and register an account with BitGo or Kraken by January 20.
The official statement says that creditors who fail to complete the requirements by the deadline will not receive the initial distribution, but may receive a supplemental distribution in subsequent months.
Furthermore, according to Section 7.8 of the reorganization plan, if the holder fails to complete the pre-distribution requirements within 6 months from the initial distribution record date (January 3, 2025), they will lose their distribution rights.
Also, according to Section 7.14, if the holder receives a request to complete the requirements, they must do so within the specified time frame, or they will also lose their distribution eligibility.
How much compensation can creditors receive?
According to the FTX bankruptcy plan, the company estimates that it will have up to $14.5 billion to $16.3 billion in cash available for distribution. The plan applies to 98% of creditors, and the repayment "is calculated based on the USD price of cryptocurrencies on the date FTX filed for Chapter 11 bankruptcy on November 11, 2022.
Although FTX expects that the vast majority of creditors (claims of $50,000 or less) will be able to recover 118% of the value of their claims in USD. However, unless the user's assets held at FTX were stablecoins, they will most likely still suffer significant losses.
BTC has surged over 500% since FTX's bankruptcy
For example, when FTX filed for bankruptcy protection, the BTC price was only around $16,000, but the current BTC price has soared to around $98,000, which means that if a creditor held one BTC at FTX at the time, they would only receive $16,000 in the end, which is about 16% of the current price, which can be said to be a huge loss.
Will FTX's repayment inject $16 billion into the crypto market?
Regarding the news of FTX's upcoming repayment, weRate co-founder Quinten said that this is a huge positive for the crypto market. He pointed out that FTX will start repaying $16 billion to creditors starting from January 3, and it is expected to be completed within 60 days. Quinten believes that a large portion of these funds may flow back into the cryptocurrency market, serving as fuel to drive a bull market.
However, FTX's well-known creditor Sunil immediately responded, clarifying that the repayment will not start from January 3. He pointed out that the first batch of repayments is expected to wait until February to March 2025, and it will only be for creditors in the "convenience class", totaling $1.2 billion. For creditors with claims exceeding $50,000, a total of $10.5 billion in payments will be made later. He further outlined FTX's total asset profile:
- Cash reserves: $13 billion
- Venture capital portfolio and litigation proceeds: Estimated between $5 billion and $7 billion:
Sunil added that about 50% of the claims have been acquired by claim buyers, but these buyers are not interested in crypto assets, which may reduce the likelihood of funds flowing back into the crypto market.
