On February 18, 2025, the once-mighty cryptocurrency exchange FTX , which collapsed in late 2022, began repayment to its creditors. This marks a significant turn of events in the infamous bankruptcy of the exchange. The initial payout to these creditors will target smaller claims, with amounts under $50,000, and issue a total of $1.2 billion in the first round of repayments. However, the plan has drawn significant ire and pushback from the creditors, particularly holders of Bitcoin and Solana, because FTX has decided to use the value of their assets from November 2022 to determine how much they are owed. The creditors, in turn, have quite rightly pointed out that none of them had the choice to do anything except go along with the bankruptcy plan and that they are now being repaid with less of their original assets than what they are worth today. FTX’s repayment plan allows the exchange to “lock in” repayment values based on the market prices of assets from November 2022—the month before FTX declared bankruptcy. This method of valuing assets aims to provide some stability in an otherwise volatile environment. Yet it has left many creditors feeling shortchanged, especially in light of the fact that some of the same assets have dramatically increased in price since then. This decision hits Bitcoin holders hardest. As of the time of writing, Bitcoin trades at $97,988—a stark contrast to the $20,000 baseline that FTX is using for its payouts. If you’re a creditor who held Bitcoin at the time of collapse and you’re expecting a sizable return on your investment, think again. The FTX handlers seem to think that a good rule of thumb is to pay creditors with assets that have appreciated in value at the prices those assets commanded at the time of the bankruptcy. In the same way, Solana, a cryptocurrency that had strong ties to FTX, has seen a price uptick since the exchange’s downfall. From a price of nearly $22 at the time of FTX’s collapse, Solana has soared to more than $180 today. That represents a more than 700% increase. But FTX’s repayment calculations are based on the value of Solana at the time of its collapse. So, in effect, creditors who held Solana tokens in FTX are now receiving far less than what they would receive if FTX’s repayment calculations used the current market price of Solana. Widespread frustration among creditors has been caused by these price discrepancies. They feel that FTX’s decision to lock in repayment values at outdated levels is unfair, especially considering the dramatic swings in the crypto market over the past year. FTX’s Reorganization and Distribution Plan Even though there are complaints about the way in which FTX’s assets have been valued, the company has made some positive steps toward fulfilling its obligations to creditors. On January 3, 2025, a plan of reorganization was approved for the company, which has now been instructed to pay back $16 billion to creditors in staged payments. In the first stage, which happened in the first week of March, the company paid out about $1.2 billion to a constellation of creditors. According to BNN Bloomberg, “the next stage of the payout is expected to address larger claims, with those creditors potentially set to receive up to 175% of the original value of the claims they filed.” FTX, however, has set aside 50% of the $16 billion to be withheld for disputed claims. This means that while some creditors will receive their payouts soon, others may face delays as their claims are reviewed and contested. Crypto custodian BitGo has been entrusted with managing the fund distributions, and all repayments are expected to be completed within 60 days of the reorganization plan taking effect, which provides a clear deadline for the distribution process to unfold. Even with a structured plan in place, using repayment prices from November 2022 and with a portion of payouts held back for disputed claims has left a not-so-happy bunch of creditors. Aligning with current market prices would have soothed many a ruffled feather, especially among those who have benefitted from significant increases in the value of their holdings since FTX declared bankruptcy. Unlocking of Solana Tokens and Future Implications Besides paying back the creditors, FTX will, on March 1, 2025, release a huge quantity of tokens from its bankruptcy estate—specifically, 11.2 million SOL tokens, which at today’s market price are worth about $2.06 billion. That makes this token release not only one of the largest upcoming releases from FTX’s bankruptcy estate but also one of the largest token releases in general. The size of the release and its timing mean it’s very likely to have a significant impact on the price of Solana. How these tokens will be released may also add another layer of complexity to FTX’s repayment of creditors. The repayment of creditors is already a difficult problem to solve, and FTX is attempting to do so in phases. But Solana’s price could be significantly affected by the release of 49 million unlocked (or unlocked in part) tokens. That, of course, is part of what makes Solana holders (as well as creditors) concerned. But what makes it even more concerning for everyone involved is this: If Solana holders will be owed “repayment” in very devalued assets (due to price suppression that could accompany the release of so many unlocked tokens), then what makes Solana holders think they will be treated fairly by a bankruptcy court? The Road Ahead for FTX Creditors Even as the repayment process begins, the path forward for FTX creditors is littered with uncertainty and irritation. Authorities have decided that the values to be repaid will be based on prices that prevailed long before the exchange failed. Moreover, they have decided that the repayment process will not be helped along by the immediate release of funds set aside for claims that are still under dispute. In other words, creditors can expect to be paid back, but only after the repayment process has made considerable headway—a prospect that appeared to be offering no better than a light at the end of a lengthy tunnel. Even though the structured payout plan is easy to understand, it still leaves many questions unanswered. For one thing, it doesn’t say when creditors will get paid. That typically hinges on the bankruptcy plan’s getting approved, which in turn depends on the judge’s being persuaded that it’s feasible and won’t lead to a bunch of lawsuits. And as for the payout itself: Missing from the plan is any indication of what the creditors are actually going to get. Creditors will likely be watching closely as FTX moves through its bankruptcy process to figure out whether they’ll be receiving any fair compensation for their losses. With $16 billion on the line and a sophisticated distribution plan in place, FTX’s next few months in court will be crucial for creditors—who are, after all, part of the current—and hoping for a coming resolution that accurately reflects the current value of their compromised holdings. Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services. Follow us on Twitter @nulltxnews to stay updated with the latest Crypto, NFT, AI, Cybersecurity, Distributed Computing, and Metaverse news ! Image Source: loft39studio/ 123RF // Image Effects by Colorcinch
