FTX, the cryptocurrency exchange that faced a huge collapse in late 2022, has recently announced a reorganization plan that will take effect on January 3, 2025. After years of uncertainty, the affected customers are finally getting their funds back. The exchange was led by founder Sam Bankman-Fried, who was convicted. This plan, which is approved by the court, is working to repay customers and creditors who had to suffer losses during the company’s downfall.
What Happened To FTX?
FTX filed for Chapter 11 bankruptcy after a rapid decline in November 2022. This made many users unable to access their funds in FTX. The company’s founder, Sam Bankman-Fried, was later convicted of fraud and sentenced to 25 years in prison.
This reorganization plan is meant to return funds to FTX’s customers and creditors. It will become effective on January 3, 2025, when they will start the repayment process. The initial distribution is expected to occur within 60 days of this date, focusing on smaller claims of $50,000 or less. The plan’s Convenience Classes will be considered first for initial distribution, having separate records and payment dates. FTX has partnered with BitGo and Kraken, who will handle the distribution of funds to those who are eligible customers and creditors. John J. Ray III, the Chief Executive Officer of the FTX Debtors, is optimistic about the progress made over the past two years.
FTX has managed to recover between $14.7 billion and $16.5 billion in assets to repay its customers and creditors. The reorganization plan has been approved to recover 98% of the users’ original deposits.
Since 2013, BitGo, which is a globally regulated custodian has been issuing trading and settlement services for them, and Kraken was in charge of spot trading and regulated derivatives. Partnerships with them make sure the recovery is well distributed to both retail and institutional customers who were affected by the company’s collapse.
Major Details Of The Reorganization Plan
FTX estimates that it will have between $14.5 billion and $16.3 billion available for distribution to creditors, derived from different asset monetization, including investments from Alameda Research and other holdings.
Approximately 98% of creditors are expected to receive about 119% of their allowed claims, which is a great recovery rate when compared to other typical bankruptcy outcomes. While BitGo and Kraken are handling the repayments in cash or stablecoins, creditors must complete specific onboarding steps, like KYC verification and tax form submissions, before they can receive payments.
For claims that have been transferred and have been processed and recorded in the official register of claims will be distributed by the Notice and Claims Agent as of January 2, 2025.
While the plan promises full refunds with interest, which is an unseen practice in companies with bankruptcies, some customers are dissatisfied. Their claims are valued based on the low crypto prices at the time of bankruptcy and not their current high values. For example, coins like Bitcoin have had a huge jump in prices since 2022, so it is not a case of profit for them.
Next Steps For Creditors
To qualify for the initial round of distributions, creditors must log in to the FTX debtor client portal and complete KYC verification. Then submit the necessary tax forms and open an account with either BitGo or Kraken.
John Ray III, the CEO of FTX, stated “Over the past two years, our professional team has efficiently worked to recover billions of dollars in assets. The success of the reorganization plan in January 2025 and the starting of distributions show the outstanding success of our asset recovery efforts”. He also thanked all customers and creditors who were patient throughout the entire process.