Cryptocurrencies

FTX creditors set to receive partial payouts

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Rumors circulating online suggest that FTX (CRYPTO:FTT) will begin distributing payments to creditors by September 30, 2024, but these claims are inaccurate.

According to the FTX bankruptcy estate, the distribution process is still pending court approval.

The next hearing, scheduled for October 7, 2024, will determine the fate of the reorganisation plan under the supervision of Judge John T. Dorsey in the United States Bankruptcy Court for the District of Delaware.

If the court approves the plan, smaller creditors with claims under $50,000 could begin receiving payouts by the end of 2024.

Larger creditors may have to wait until the first or second quarter of 2025 to see their reimbursements.

Opposition to the plan is strong, with many creditors, led by Sunil Kavuri, pushing for repayments in the form of cryptocurrency rather than cash, citing concerns over potential taxable events from cash payments.

FTX’s legal team argues that the current bankruptcy laws require reimbursements to be in cash to avoid further delays in the process.

This conflict has sparked a debate between the creditors and the FTX estate, particularly around the issue of how to fairly compensate those affected by the collapse.

According to the current reorganisation plan, creditors will be reimbursed at the value of their crypto holdings on the petition date, which was significantly lower.

For example, Bitcoin (CRYPTO:BTC) was valued at $16,000 during FTX’s bankruptcy filing, compared to around $65,000 today.

This means creditors are expected to receive only a small fraction of their original holdings, leading to further dissatisfaction.

At the time of writing, the FTX price was $2.32.

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