Creditors Set to Receive 118% of Claims in Cash

• FTX creditors will receive 118% of their claims based on values at the time of bankruptcy in 2022.
• The plan prioritizes cash repayments, although some creditors prefer asset distributions to reduce tax liabilities.

A major turning point in the bankruptcy processes of the crypto exchange, U.S. bankruptcy judge John Dorsey has authorized the reorganization plan for FTX. Almost two years following its well-publicized fall in November 2022, this action opens doors for creditors to be paid back off.

Though the repayments will be based on the asset prices at the time of the bankruptcy filing, the plan states FTX will refund 98% of creditors with at least 118% of their claims.

With FTX recovering between $14.5 billion and $16.3 billion to settle its claims, the ruling marks the end of one of the most intricate Chapter 11 bankruptcy cases in recent history.

Cash Repayments Chosen Due to Lack of Crypto Holdings at FTX 

Since FTX apparently lacks the required crypto holdings to route them straight to creditors, the pay will mostly be given in cash. This is a result of the logistical and financial difficulties that would have followed should the business try to buy the necessary cryptocurrencies for such distribution.

Although the corporation had thought about this alternative, it decided that buying lots of cryptocurrencies would run the danger of raising the market price, so lowering the amount returned to creditors.

Some creditors are nonetheless unhappy despite the cash returns, especially those whose portfolios would have valued much more if they had kept onto their Bitcoin.

The BTC price hung about $16,000 when FTX filed for bankruptcy, but it has since risen to almost $60,000, leaving creditors feeling as though they are losing out on significant gains.

The reorganization scheme is also supposed to include creditors in more than 200 countries, complicating the distribution procedure.

Both the crypto sector and authorities have been keenly observing the case since it features well-known personalities such as former FTX CEO Sam Bankman-Fried, who is presently serving a 25-year jail sentence for fraud connected to the company’s fall-through.

Reflecting the broad influence of the collapse, other important FTX officials, including former Alpha Research CEO Caroline Ellison and Ryan Salame, have also been imprisoned.

Apart from that, as we previously noted, several creditors have asked for assets instead of cash to help avoid significant tax obligations resulting from the cash distributions.