FTX Reveals Distribution Date for $16B Repayment to Users

FTX approaches the end of its bankruptcy process as it unveils a new date for $16 billion reimbursement to creditors.

The FTX bankruptcy estate announced the development in a recent press release, noting that the court-approved Chapter 11 reorganization plan will take effect on January 3, 2025. Per the announcement, January 3 will also serve as the initial distribution record date for holders within the plan’s Convenience Classes.

Notably, FTX will commence initial repayment within 60 days of the effective date. In preparation for the distribution, FTX agreed with two prominent crypto exchanges, Kraken and BitGo. These trading platforms will oversee the distribution of the funds to eligible customers.

Preparation for Repayment 

The announcement provided a guide on how customers and creditors will be eligible for the initial distribution. This includes completing a mandatory know-your-customer (KYC) verification process on the FTX Claims platform and submitting the necessary tax forms. 

Afterward, these users must onboard to BitGo or Kraken before the January 3 effective date. Upon completing these requirements, FTX will commence the initial distribution within 60 days of the effective date of the court-approved reorganization plan. 

The initial repayment will focus on creditors with claims under $50,000. Notably, these customers account for around 90% of all eligible creditors in FTX bankruptcy proceedings. 

The system groups them under the Convenience Classes. After the initial distribution, FTX will announce separate records and payment dates for other classes in the future. 

Previous Repayment Schedule 

It was initially speculated that creditors with less than $50,000 claims might receive repayments in Q4 2024, while those with higher claim amounts will get their reimbursement before the end of next year.

Following the latest update, users with under $50,000 worth of claims will be reimbursed within 60 days after the reorganization plan goes into effect on January 3, 2025. Separate dates are expected to be revealed for other creditor classes.

Recall that a Delaware bankruptcy court approved the FTX reorganization plan in October. The plan allows 98% of creditors to receive the USD equivalent of their FTX crypto holdings based on a 118% price of their due claims as of when the exchange officially filed for bankruptcy in November 2022. FTX could spend up to $16 billion to make its creditors whole.

Mixed Reactions Trail FTX Repayment 

Before now, crypto enthusiasts had raised concerns about FTX’s upcoming repayment, with users expressing mixed reactions. 

Some investors project that the repayment may take a devastating toll on the crypto market, as FTX may sell most of its crypto holdings to raise cash for the distribution. 

However, others believe the market will benefit immensely from the distribution exercise. These users suggest that FTX customers could reinvest some of their claims, which might come in USDT, into the crypto market.

It remains to be seen how the broader market will react when the initial distribution commences within the first quarter of next year. In the meantime, the global crypto market cap is up 0.96% over the past 24 hours to $3.74 trillion, with Bitcoin accounting for 56.6% of this valuation.