Several rumours have surfaced on social media claiming that the FTX bankruptcy estate will begin distributing reimbursement funds to creditors and customers by September 30. However, these claims are false, as no reimbursement plan has been approved by the court.
According to an updated Chapter 11 filing, the next court hearing to confirm the restructuring plan is scheduled for October 7. Judge John T. Dorsey of the United States Bankruptcy Court for the District of Delaware will oversee the proceedings, according to a document of Kroll.
FTX Creditors Will Have To Wait Till October
If the restructuring plan is accepted, claimants with less than $50,000 in claims may receive payouts by the end of 2024. However, larger claimants might not be able to get any payouts until the first or second quarter of 2025. This schedule is contingent upon the court’s ruling during the October hearing.
Creditor disputes and other issues have complicated FTX’s bankruptcy. Among them, Sunil Kavuri’s group is the most vociferous, having objected to the present reorganisation proposal multiple times. One significant problem is that rather than receiving payment in cash, creditors have asked for in-kind recompense or bitcoin.
As cash payouts could result in a taxable event, further lowering the amount that creditors and former customers finally receive, Kavuri suggests that doing this would help them recover a bigger share of their lost assets.
However, the legal staff for FTX is still adamant that cash payments to creditors are required. They contend that any bitcoin distribution would be illegal under Chapter 11 bankruptcy rules and might cause the entire process to be delayed. This has increased the already existing conflict between the legal team and creditors, who maintain that monetary settlements are insufficient.
Why did the Confusion Happen?
The price of cryptocurrencies at the time the legal petition was filed is at the heart of the dispute. Bitcoin was worth a little over $16,000 at the time, a far cry from what it is now.
Recent bankruptcy filings published by Kavuri indicate that creditors and former customers would recover only a small portion of their previous ownership under the proposed distribution plan which is roughly 10–25%. Claimants are now frustrated because they believe the plan does not fairly compensate them for their losses.
For those with claims under $50,000, the prospect of receiving funds by the end of 2024 offers some relief, though the uncertainty around the payout method remains. Kavuri and other creditor activists continue to push for a fairer solution, advocating for in-kind distributions that would more accurately reflect the current value of the assets they lost when FTX collapsed.
As the October 7 hearing approaches, stakeholders in the FTX bankruptcy case are closely watching for any updates. The court’s decision will determine whether creditors receive the funds in cash or crypto. And when those payments will be disbursed.
For now, the rumours of imminent payouts are just rumours. Until the court approves a final plan, creditors will have to wait for clarity on how, and when, they will recover their funds.