- FTX this week unveiled a settlement plan that would see 98% of creditors receive 118% of their permitted claims, despite a few missteps along the route.
- Spot volume in FTT pairings on May 8, the day the scheme was unveiled, was $139 million.
- This is a sample from the Data & Insights newsletter published by The Block.
After the cryptocurrency exchange filed for bankruptcy at the end of 2022, it was a good week for FTX creditors—words that few people had anticipated to be published.
But things are looking up for the now-defunct organization. One reason is that when FTX failed, the values of cryptocurrency assets were practically at an all-time low, and its holdings in cryptocurrency are now worth far more than they were.
In order to raise money to repay creditors, the bankruptcy estate was able to sell off its locked Solana tokens, its shares in the AI business Anthropic, and its shares in GBTC.
Not all of the actions made by those in charge of the bankruptcy have been ideal; in April 2023, just before Sui’s token launch, Mysten Labs paid $96 million to repurchase FTX’s investment and token warrants. It would have been far more valuable had the estate chosen to hang onto that for a longer period of time.
However, FTX announced last week that 98% of creditors (those with claims under $50,000) would receive 118% of their permitted claims, notwithstanding the missteps made along the route. In addition to receiving full payment, other creditors will also get billions extra to cover the time value of their lost money. FTX projects that it has between $14.5 billion and $16.3 billion in cash on hand for distribution.
FTX creditor claims were subsequently sent above 100 cents on the dollar. By selling their claims to the payout, creditors can obtain some money back more quickly—usually at a lower price than they would have if they had waited.
News of claims selling for as much as 65 cents on the dollar surfaced in November 2023, indicating that a significant recovery was anticipated. Earlier in the year, expectations were for creditors to receive much less in the end.
Since everyone is now expected to repay the debt in full and above, these creditor claims are therefore more costly; as of this writing, they trade at 109%.
However, not everyone is content. The largest group of FTX creditors, led by Sunil Kavuri, has been pushing creditors to vote against the most recent compensation proposal.
The main complaint is that when the exchange filed for bankruptcy, the plan paid creditors the dollar value of their positions instead of repaying them in bitcoin. Given that asset values have increased dramatically after the implosion, Kavuri asserts that FTX has “destroyed an estimated over $10 billion” for creditors.
However, since many claims are now owned by investors in distressed assets and because many of the claims are stablecoin-based, Thomas Braziel, a partner at 117 Partners and 507 Capital and an investor in distressed assets, is not concerned about backlash on the proposal.
excellent news for FTX naturally translates to excellent news for FTT. Though hopes for the exchange to be revived have been shattered, effectively nullifying any possible usage of the token in the future, on May 8, the day the proposal was revealed, there was $139 million in spot trading in FTT pairs. For the token, it was the most active day since the end of December.
Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
