FTX Bankruptcy Plan Takes Effect with Repayments for 98 Percent of Users

• FTX’s bankruptcy plan enables payouts, with 98% of users eligible for 119% refunds on claims under $50K, easing years of turmoil.
• Creditors criticize reimbursement valuation based on 2022 crypto prices, as Bitcoin’s 400% surge inflates unrealized claim losses.
• Legal and logistical hurdles persist, but $16B payouts are underway via BitGo and Kraken, offering relief amid crypto’s market rebound.

FTX’s bankruptcy plan officially took effect on January 3, 2025, marking a pivotal moment for affected users. Convenience Class claimants, those with approved claims under $50,000, became eligible to register for repayments starting the same day. This milestone comes after years of legal and financial turmoil following the exchange’s collapse in November 2022.

According to the plan, Convenience Class users will receive 119% of their declared funds. This development is expected to provide relief to 98% of FTX users. Additionally, larger claimants with over $50,000 in claims will receive payments from a separate $10.5 billion fund. However, their distribution timeline remains uncertain. Analysts from K33 have estimated that these repayments could reintroduce $2.4 billion into cryptocurrency markets.

The Impact of Cryptocurrency Valuation

Many creditors have raised concerns over the valuation methodology adopted in the plan. Reimbursements will be based on cryptocurrency prices as of the 2022 bankruptcy filing. Notably, Bitcoin prices have surged over 400% since then, now trading at $98,697. 

Creditors have argued that this approach undervalues their claims. A further $3.9 billion in claims was acquired by credit funds, entities that are unlikely to reinvest in crypto markets. Additionally, approximately 33% of claims belong to sanctioned countries, insiders, or individuals without KYC verification, rendering these funds potentially inaccessible.

Legal and Logistical Challenges Persist

FTX’s downfall has caused several top executives to face legal consequences. While Sam Bankman-Fried, Caroline Ellison, and Ryan Salame received prison sentences, co-founder Gary Wang and engineering director Nishad Singh avoided incarceration. Bankman-Fried, however, continues to appeal his conviction.

To streamline repayments, crypto firms BitGo and Kraken have partnered to assist in distributing funds to creditors. Assuming users complete the required claims process, FTX is expected to pay out approximately $16 billion. Nonetheless, logistical complexities and ongoing legal challenges might delay broader distributions.