Just In: FTX Announces Plans For Reorganization and Creditor Repayments

FTX, the bankrupt cryptocurrency exchange, has announced plans to repay creditors under a reorganization plan set to take effect on January 3, 2025. The company stated that initial creditor distributions will begin within 60 days of the effective date, marking a crucial step in its efforts to resolve claims following its collapse in late 2022.

FTX Plans for Reorganization and Creditor Repayments

FTX has announced that it has engaged the services of Kraken and BitGo in the disbursement of funds to creditors and customers. Moreover, both firms are well-versed in managing cryptocurrencies as well as handling payments. FTX customers and creditors with allowed claims will be paid either in cash or digital assets, including stablecoins, subject to the choice of the recipient and regulatory requirements.

Kraken, a U.S.-based cryptocurrency exchange launched in 2011, has helped in similar cases before, for example, in processing creditor payments in the course of the Mt. Gox bankruptcy. On Monday, Kraken stated, “We are pleased to participate in this distribution process given our expertise in asset recovery and distribution.”

BitGo, a SanFrancisco based cryptocurrency custodian founded in 2013, also underscored its security measures in.assets management in the course of the repayment. CEO, Mike Belshe, said,

“We have protected billions in crypto assets for institutions, thus maintaining the highest levels of accountability and integrity, and we’re proud to be associated with FTX.”

Chapter 11 Plan Approval and Effective Date Set

FTX’s Chapter 11 bankruptcy plan was confirmed in October by Judge John Dorsey of the U.S. Bankruptcy Court in Delaware. The plan, with voter approval from 94% of the key classes of eligible creditors, describes how customers and creditors will be reimbursed, and how the remaining claims will be addressed.

According to the reorganization plan, the customers and creditors are expected to get at least 118% of the total claims they made in cash. The court has made January 3, 2025, as the date on which the plan will be implemented and also the date to determine the people to receive the first distribution.

John J. Ray III, the CEO of FTX Debtors, said that the approval of the plan is a big step, noting,

“Our work over the past two years has led to billions of dollars being returned to creditors and customers.” This is considered as a breakthrough in the process of returning the money to the owners.”

Steps Required for Eligible Creditors

FTX has outlined several measures that the creditors have to follow in order to receive the distributions. These include logging into the FTX Customer Portal, going through the KYC process, filing tax forms and creating an account with either Kraken or BitGo.

As for the claim transferors, distributions will only be made to the person who has been registered as the holder of the claim as of January 3, 2025. This move comes after FTX had filed for bankruptcy at the end of 2022 due to embezzlement and poor management misconduct. Despite these allegations, some former executives from FTX like Nishad Singh, FTX Executive Gary Wang were spared from jail term unlike Ryan Salame who got 7.5 years and Caroline Ellison 2yrs. 

Concurrently, its founder and former CEO, Sam Bankman-Fried, was found guilty of several criminal charges in November 2023 and was sentenced to serve 23 years in prison. Despite all these, the company management, headed by John J. Ray III, has endeavored to reclaim assets and regain the confidence of creditors.