Nearly two years since the dramatic collapse of FTX, the now-defunct cryptocurrency exchange, which left over nine million users facing a staggering $10 billion loss. Now, a glimmer of optimism emerges from the FTX bankruptcy estate, indicating its determination to eventually reimburse its customers in full.
The FTX bankruptcy estate sets its sights on initiating repayments to customers by the end of 2024, as disclosed during discussions among the Joint Official Liquidators of FTX Digital held in the Bahamas.
The estate is concurrently navigating two distinct processes: the Chapter 11 bankruptcy proceedings filed in Delaware and the formal liquidation of FTX Digital, a subsidiary based in the Bahamas. Both arms of the estate have committed to cooperation to ensure that creditors can lodge their claims with either entity and receive the complete value owed to them.
According to minutes from the meeting, both the Chapter 11 Debtors and the Joint Official Liquidators share the objective of commencing the initial distribution to creditors with acknowledged claims and satisfactory Know Your Customer (KYC) documentation by the end of 2024.
Creditors have had the opportunity to submit claims via the FTX claims portal since March 1 when the portal became operational. Users have until May 15 to opt for one of the two bankruptcy processes and file a claim. However, it’s anticipated that the deadline will be extended, likely until at least June 2024, as per the meeting discussions.
Although the announcement from FTX represents a significant milestone, its proposed approach continues to face criticism from many creditors.
FTX Users Express Discontent with Chapter 11 Proposal
In December 2023, the FTX Debtors’ Estate put forth a revised Chapter 11 plan proposing to compensate victims based on the cash value of digital assets held on the exchange rates at November 11, 2022, —the date of the bankruptcy filing.
However, FTX creditors have contested this proposal, arguing that it’s unjust due to the substantial surge in cryptocurrency prices since the bankruptcy date. Notably, Solana, comprising over 34% of FTX’s holdings, has witnessed a meteoric rise of over 1600% to $200 since November 2022. Meanwhile, Bitcoin, representing 15% of the exchange’s holdings, has surged to a new all-time high, registering an increase of over 370% to $73,000.
In response to user grievances, FTX attorney Andy Dietderich emphasized the clarity of US bankruptcy law, stating, “I have no wiggle room on that. The Bankruptcy Code says what it says, and I am obligated to follow it.”