FTX creditors expected to be fully repaid as no buyer found for relaunching exchange
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FTX creditors expected to be fully repaid as no buyer found for relaunching exchange
If approved by the bankruptcy court, these funds are expected to be distributed before the end of the second quarter of 2024. It should be noted that FTT holders will not be eligible for any claims.
Navigating Web3 tides with focused insightsAuthor: Nancy
Despite ongoing positive developments regarding FTX's potential relaunch over recent months, the exchange has abandoned its revival plans due to lack of buyers. However, it is expected to fully repay creditors. Following this news, CoinGecko data showed FTT briefly spiked before rapidly declining, falling more than 18.1% in the past 24 hours.
As early as June last year, FTX revealed it had begun soliciting interest from parties willing to restart the exchange. Since announcing its revival intent, FTX received expressions of interest from over 75 institutions and eventually narrowed down negotiations to three bidders.
However, according to FTX attorney Andrew Dietderich during a recent court hearing, FTX does not intend to relaunch the platform. The businesses acquired by FTX for hundreds of millions of dollars have proven largely worthless, and there has been minimal buyer interest. Although FTX still possesses valuable customer data and information that could be monetized, the bankruptcy team has failed to find investors willing to commit the necessary capital to revive the offshore exchange despite exhaustive efforts.
Nonetheless, FTX expects to have sufficient funds to fully pay all approved customer and creditor claims. In fact, benefiting from the recent recovery in crypto market conditions, the value of FTX’s remaining assets has significantly increased. Based on the Top 10 holdings previously disclosed by FTX, the recovered assets exceeded $7.83 billion as of February 1. According to earlier Bloomberg reports, cash reserves of four of FTX’s largest subsidiaries—including FTX Trading Ltd. and Alameda Research LLC—nearly doubled by the end of 2023, rising from approximately $2.3 billion in October to $4.4 billion. Recently, FTX has also continued selling off substantial assets, including disposing of more than two-thirds of its GBTC shares, valued at around $1 billion.
During a subsequent hearing, the judge approved FTX debtors’ motion to convert digital asset claims into U.S. dollars. If ultimately approved by the bankruptcy court, these payments are expected to be distributed by the end of the second quarter of 2024. However, as Kris Hansen, legal representative of the FTX creditors committee, noted during the hearing, full repayment will be calculated based on the value of assets at the time claims were filed. Most claims are denominated in cryptocurrencies, which experienced significant depreciation during the volatile period preceding claim submissions. In other words, compensation will not be equivalent to current market valuations. The court found that, based on evidence and arguments presented in documents and hearings, the debtor's method of estimating claims is fair and reasonable. It should be noted that FTT holders will not receive any compensation.
Additionally, Dietderich stated that the repayment process under consideration by the U.S. Bankruptcy Court will require claimants to provide evidence of their asset holdings on FTX and subsequent losses. This evidence will be reviewed by restructuring advisors to distinguish legitimate claims from invalid ones. Users who can verify their losses, along with unsecured creditors, “will ultimately receive full repayment.”
However, FTX’s legal team also emphasized this is not a “guarantee,” but rather a goal. Achieving this outcome will require extensive work and involves significant risks.
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