FTX creditors may receive a refund of 10-25% of the value of digital assets held on the exchange before the bankruptcy.
According to updated documents from the bankruptcy proceedings, FTX creditors will only be able to recover between 10% and 25% of the value of their digital assets. Refunds will be made in fiat currency and will be calculated based on the value of cryptocurrencies at the time of the petition filing, when the price of Bitcoin was around $16,000. This has generated protests among creditors, who claim to suffer additional damages due to the difference between prices then and now. Additionally, FTX will pay 18% of all funds confiscated by the government ($1.19 billion) to a special fund for preferred shareholders up to a maximum of $230 million.
Creditor protests
One of FTX’s creditors, Sunil Kavuri, has publicly shared his disappointment, highlighting the financial and emotional difficulties that many debtors are facing following the bankruptcy. Many of them, according to Kavuri, have lost their life savings and still need to recover lost assets. Some creditors have expressed dissatisfaction with the reimbursement plan, complaining about the lack of adequate legal protections to safeguard their investments.
Kavuri also emphasized that the former FTX CEO, Sam Bankman-Fried, allegedly violated the exchange’s terms of service by using customer funds to settle debts and acquire Robinhood shares. On September 6, 2024, FTX bankruptcy administrators reached an agreement with Emergent Technologies, a company co-founded by SBF, to secure $600 million in Robinhood shares intended to compensate creditors.
Objections to the reorganization plan
In addition to creditor protests, there are other objections against the FTX estate reorganization plan. Last August, the U.S. trustee, Andrew Vara, raised objections against FTX’s reorganization plan. Vara pointed out that the plan assigns excessive legal protection to the bankruptcy estate administrators, an unusual situation compared to other similar processes. The U.S. SEC has also expressed concerns and has indicated its intention to oppose the plan if it involves reimbursing creditors through stablecoin payments.
The next court hearing to confirm the restructuring plan is set for October 7. If the plan is approved, claimants with claims under $50,000 could start receiving payments by the end of 2024. Those with higher claims may not receive distributions until the first or second quarter of 2025.
