Creditors impacted by the collapse of cryptocurrency exchange, FTX in November 2022 could begin receiving reimbursements for their losses before the end of this year, according to a recent document from the company's liquidators in the Bahamas.
The long-awaited FTX bankruptcy repayment plan is nearing completion after over two years of proceedings. The process has involved two parallel tracks: a Chapter 11 bankruptcy case in a U.S. Delaware court and an official liquidation process for FTX Digital in the Bahamas.
Both entities have stated their intention to compensate eligible creditors by the end of 2024. Creditors can submit claims to either the U.S. bankruptcy court or the Bahamian liquidation to receive a portion of their lost funds.
Claims Portal Open Until May 15th Deadline
An online claims portal opened on March 1st, allowing FTX creditors to register their claims. The current deadline for submissions is May 15th, 2024, though this may potentially be extended to June.
However, creditors are advised to meet the initial May cutoff, as missing the deadline could result in being barred from receiving any compensation. Beyond submitting a claim, creditors must also have their claims admitted and meet Know-Your-Customer (KYC) requirements to be eligible for repayment.
Controversy Over Repayment Calculations
While the repayment plans have been welcomed by many creditors, one aspect has drawn significant criticism – the proposed method for calculating compensation amounts.
Under a revised Chapter 11 plan from December 2023, creditors would be repaid based on the value of their account holdings on FTX as of November 11th, 2022 – the date of the exchange's collapse.
This has angered many creditors who argue that the plan undervalues their losses, as many cryptocurrencies held on FTX substantially increased in value after the bankruptcy filing.
Responding to the backlash, FTX's legal representative Andy Dietderich stated, "I have no wiggle room on that. The Bankruptcy Code says what it says, and I am obligated to follow it." The repayment calculations adhere to U.S. bankruptcy law, though creditors may continue to dispute the methodology.
As the claims process plays out, all eyes are on the May 15th deadline and whether FTX can indeed deliver promised reimbursements to creditors by year's end after its catastrophic implosion.