No, FTX Creditors Are Not Being Reimbursed Yet: Everything You Need to Know

Key Takeaways

• FTX’s reorganization plan is still pending court approval, with a hearing slated for Oct. 7.
• The creditors might have to wait up to one year to get their lost funds.
• The creditor might only receive 25% of the USD value of the lost crypto assets.

Rumors about FTX creditors getting a $16 billion payout this week are rife; however, contrary to what many influencer accounts on social media are peddling, the repayment might take longer than anticipated.

Shareholders Get Preference; Creditors Might Have to Wait Until 2025

Despite reports of FTX reimbursements surfacing, the exchange’s reorganization plan is still pending court approval, with a hearing scheduled for Oct. 7, 2024.

And as per the plan, creditor reimbursements could take years.

FTX’s latest filing shows that the defunct exchange has set aside $230 million for shareholders, a departure from the usual practice of prioritizing creditor reimbursements.

What’s interesting is that most FTX shareholders are clients of Sullivan & Cromwell , the firm responsible for overseeing the bankruptcy restructuring.

FTX creditor activist Sunil Kavuri has spoken out  about the repayment process, contradicting misinformation spread by large social media accounts.

According to Kavuri, the reimbursement timeline is longer than initially thought, with some creditors potentially waiting until the second quarter of 2025.

Kavuri noted that claim distribution for less than $50,000 will be processed first and might be completed by the end of this year. However, reimbursement will begin next year for claims higher than $50,000.

Here’s how the repayment process is expected to unfold:

• The final hearing for the approval of the repayment plan is slated for Oct. 7.
• Claims under $50,000 will be processed first, with reimbursements potentially completed by the end of this year.
• Claims above $50,000 will be addressed next, with reimbursements starting in 2024.
• Debtors have already purchased around 50% of claims worth $5.5 billion, which are expected to be fulfilled by the second quarter of 2025.
• The remaining claims may take 2-3 years to resolve.

Creditors to Get Only 10-25% From FTX Payout?

FTX’s latest filing also revealed that creditors will only receive a fraction of their lost crypto assets.

Instead of being reimbursed the full value of their lost assets, creditors will receive the USD equivalent of the asset’s value at the time of FTX’s collapse in November 2022.

To put this into perspective, if a user has lost one Bitcoin, they won’t receive the token’s current value, which is above $65,000. Instead, they’ll receive the USD value of 1 BTC in November 2022, approximately $16,000—a quarter of its current value.

FTX bankruptcy filing | Source: Kroll.

During the reorganization plan, there were rumors about potentially restarting the defunct exchange.

FTX’s court-appointed CEO, John J. Ray III, claimed that they had recovered most of the assets, and as the price of the crypto tokens went high, many joked that FTX might be able to repay more than what it lost in USD value.

The news is a bitter pill for creditors who had been hoping that FTX’s sudden surge in crypto prices would somehow lead to a full recovery of their losses.

Some optimists thought FTX might be able to pay back more than it owed in USD terms, thanks to the rising crypto market. But those hopes have been dashed.

Instead, creditors now face the harsh reality of a payout that’s just a fraction of what they’re owed— likely 10-25% of the original value.