FTX compensation is imminent: the amount received may be less than a quarter, shareholders "cut in line" to distribute 230 million dollars

Editor: Felix, PANews

Recently, the latest developments in the FTX bankruptcy case have sparked debates and panic among some members of the crypto community. Initially, it was reported that creditors might only receive 10-15% of their assets, while shareholders "forcefully jumped the line" to allocate $230 million in assets to themselves; later, rumors emerged that FTX would start distributing repayment funds to creditors and customers on September 30. The FTX token (FTT) surged over 80% within 24 hours, peaking at $2.71, and is currently reported at $2.14.

Newly Revised Bankruptcy Documents Spark Outrage

According to the FTX bankruptcy plan, which received "overwhelming preliminary support" from creditors, 98% of creditors were to receive at least 118% of their claim value in cash.

However, on September 28, FTX creditor representative Sunil Kavuri disclosed the latest revised bankruptcy documents on the X platform, stating that the refund amount would be based on the value of cryptocurrencies at the time FTX filed for bankruptcy. As a result, creditors would actually receive "10% to 25% returns on their cryptocurrencies." For instance, Bitcoin was only about $16,000 at that time.

This decision left many creditors disappointed and even sparked anger among FTX creditors.

Sunil Kavuri claimed, "The debtors, the U.S. Department of Justice, and Judge Kaplan confirmed that cryptocurrency holders were not compensated as of the filing date. Many FTX users continue to suffer from mental distress, panic attacks, divorce, and suicidal thoughts because their life savings were stolen, and their assets have not been returned."

The vast majority of FTX creditors agreed with Kavuri's viewpoint. One user stated, "It's disgusting that this was secretly slipped into the plan so late after the vote." Another FTX creditor commented, "I don't understand why the law can't protect us investors," describing FTX's collapse as a scam. One FTX creditor remarked, "Shameful, we were deceived twice."

FTX to Allocate $230 Million from Government Seizure Proceeds to Shareholders

Compounding the situation is a newly disclosed agreement, led by Sullivan and Cromwell lawyers, stating that the FTX Estate will donate 18% of the proceeds from government seizure actions to a special fund for the "exclusive benefit" of certain shareholders, totaling up to $230 million. Although the agreement was officially executed on August 28, nearly two weeks after the deadline for creditors to vote on the plan, it was not disclosed until September 27, which was also the last day the estate was allowed to submit a revised plan.

Many creditors have called this move not only unfair but also a "criminal act," considering the significant financial losses they have suffered. In bankruptcy proceedings, creditors typically receive payment before shareholders, and when they overwhelmingly voted in favor of the plan before the August 16 voting deadline, they were unaware of this clause.

However, the documents state, "The debtors and preferred shareholders each wish to avoid the costs, expenses, and delays associated with litigation related to the plan and the seizure proceeds."

Rumors of FTX Starting Repayment on September 30

It is worth mentioning that there were even rumors on social media claiming that FTX would start distributing repayment funds to creditors and customers on September 30. The FTT token surged as a result. However, upon verification, this statement was found to be false, as the repayment plan has not yet been approved by the court and must await a hearing for confirmation.

The confirmation hearing for the FTX restructuring plan is currently scheduled for October 7 at 10:00 AM Eastern Time, during which U.S. Bankruptcy Court Judge John Dorsey in Delaware will decide whether to approve the plan. If the court confirms the plan, it will allow FTX to pay "full interest" compensation to over 98% of customers and unsecured creditors based on the dollar price of crypto assets as of November 11, 2022.

According to creditor representative Sunil Kavuri's disclosure on the X platform, approximately $5.5 billion in claims come from non-crypto users, who are expected not to invest in cryptocurrencies again. Claimants with amounts below $50,000 may start receiving distributions by the end of 2024, while those with claims exceeding $50,000 may have to wait until the first or second quarter of 2025 to receive distributions.