FTX will repay major creditors on May 30 using $11.4B in cash.
Repayments are based on November 2022 asset values, not current prices.
FTX will begin repaying its major creditors on May 30, marking a key step in the prolonged bankruptcy process. The collapsed crypto exchange has amassed $11.4 billion in cash for repayments. However, the payments will follow valuations from the bankruptcy petition date of November 11, 2022, creating a stark contrast with current asset prices.
Bitcoin, now worth five times its 2022 value, highlights the issue. Other tokens like Solana and XRP have surged by 650% and 450%, respectively. Ethereum has also gained 47%. Despite FTX estimating a 118% payout per claim, many creditors feel shortchanged due to this outdated valuation method.
FTX’s bankruptcy attorney, Andrew Dietderich, emphasized the challenge of sorting through claims. He noted that the company faces “27 quintillion” claims, many of which are fraudulent or duplicated. Bloomberg reported that FTX is prioritizing legitimate creditors while filtering out invalid claims.
Smaller creditors, holding claims under $50,000, have already begun receiving repayments. However, major creditors, including institutional investors and firms, will have to wait. The repayment process may take months due to the high volume of claims and the need to verify legitimacy.
Ongoing Creditor Frustrations
Creditors will earn a 9% annual interest rate on their claims while waiting for repayment. This creates pressure for FTX to expedite the process, as the accumulated interest increases the total payout. Meanwhile, FTX’s cash reserves generate lower returns, further adding to financial concerns.
The bankruptcy, filed in November 2022, left thousands of creditors uncertain about their recoveries. Many expected repayments in crypto rather than cash. With Bitcoin’s four times higher price, frustration among claimants has grown.
FTX secured court approval for its payout plan in October 2023. However, claim processing complexities have delayed the disbursement. The upcoming repayments will bring some closure, though many creditors remain dissatisfied.
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