Failed crypto exchange FTX officially announced on Thursday plans to distribute over $5 billion to creditors as part of its Second Distribution, scheduled for May 30 of this year.
This initiative is a crucial step in the company’s ongoing Chapter 11 Plan of Reorganization, aimed at resolving outstanding claims and facilitating the recovery process for its creditors affected by the exchanges collapse in 2022 that sent shockwaves through the crypto industry.
FTX’s Recovery Plan
According to the announcement, eligible creditors will be those who fall within the Plan’s Convenience and Non-Convenience Classes and have completed necessary pre-distribution requirements.
The distributions will be processed through selected distribution service providers, specifically BitGo or Kraken, with funds expected to reach eligible accounts within 1 to 3 business days after the distribution date.
The Second Distribution will follow a structured priority system as outlined in the Plan. Allowed Class 5A Dotcom Customer Entitlement Claims will receive a 72% distribution, while Allowed Class 5B US.
Customer Entitlement Claims will receive a 54% distribution. Additionally, Allowed Classes 6A General Unsecured Claims and 6B Digital Asset Loan Claims will each receive a 61% distribution. Notably, Allowed Class 7 Convenience Claims will receive a 120% distribution.
John J. Ray III, the Plan Administrator of the FTX Recovery Trust, highlighted the significance of this distribution, noting that it marks a pivotal milestone in FTX’s recovery efforts. Ray III further stated:
The scope and magnitude of the FTX creditor base makes this an unprecedented distribution process, and today’s announcement reflects the outstanding success of the recovery and coordination efforts of our team of professionals. Our focus remains on recovering more for creditors and resolving outstanding claims.
Creditors To Miss Out On Crypto Gains Since Bankruptcy
Despite the forthcoming payments, customers will be repaid only the amounts they were owed at the time of bankruptcy, missing out on the increased value of digital assets that have surged since then.
As of last June, FTX had approximately $12.6 billion in assets, and ongoing recovery efforts, including asset sales and legal actions against firms that owe money to FTX, could potentially increase this total to as much as $16.5 billion
Furthermore, creditors should be aware that by choosing to onboard with a distribution service provider, they forfeit their right to receive cash distributions directly from FTX. Instead, FTX will transfer any entitled distributions directly to the chosen provider.
To qualify for future distributions, creditors must complete several requirements before each record date, including logging into the FTX Customer Portal, completing Know Your Customer (KYC) verification, submitting necessary tax forms, and onboarding with either BitGo or Kraken for distribution processing.
For transferred claims, distributions will only be made to the rightful holder of an allowed claim recorded in the official claims register, ensuring all claims are properly processed and validated.
Featured image from Shutterstock, chart from TradingView.com
