FTX's $1.6B Payout Sparks Legal Battles Over Jurisdiction and Valuation Disputes

FTX Trading Ltd. and the FTX Recovery Trust announced on September 19, 2025, that they will distribute approximately $1.6 billion to creditors in the third round of their Chapter 11 reorganization plan, scheduled for September 30, 2025. The distribution follows a reduction in the disputed claims reserve by $1.9 billion, from $6.5 billion to $4.3 billion, approved by the U.S. Bankruptcy Court. This adjustment, announced on July 23, 2025, freed additional liquidity for creditors, with the third distribution prioritizing claims under the Plan’s Convenience and Non-Convenience ClassesFTX Recovery Trust to Distribute Approximately $1.6 Billion to Creditors in Third Distribution on September 30, 2025^[1].

Under the reorganization plan, the distribution will allocate funds based on predefined waterfall priorities. Allowed Class 5A Dotcom Customer Entitlement Claims will receive an incremental 6% distribution (78% cumulative), while Class 5B U.S. Customer Entitlement Claims will get 40% (95% cumulative). Both Class 6A General Unsecured Claims and Class 6B Digital Asset Loan Claims will each receive 24% (85% cumulative), and Class 7 Convenience Claims will be fully distributed at 120%FTX Recovery Trust to Distribute Approximately $1.6 Billion to Creditors in Third Distribution on September 30, 2025^[1]. Creditors must complete pre-distribution requirements, including Know Your Customer (KYC) verification, tax form submission, and onboarding with BitGo, Kraken, or Payoneer, to qualify for the payoutFTX Recovery Trust to Distribute Approximately $1.6 Billion to Creditors in Third Distribution on September 30, 2025^[1].

The August 15, 2025, record date marked the eligibility cutoff for the September 30 distribution. Claims must be reflected on the official register of claims maintained by the Notice and Claims Agent, with a 21-day notice period lapsing without objection. Transferred claims will only be distributed to the transferee holder as of the record dateFTX Sets Next Distribution Date Following Disputed Claims …^[3]. Phishing advisories were reiterated, with FTX warning against fraudulent emails or websites impersonating the FTX Customer PortalFTX Recovery Trust to Distribute Approximately $1.6 Billion to Creditors in Third Distribution on September 30, 2025^[1].

The reduction in the disputed claims reserve has sparked legal and regulatory scrutiny. Approximately $470 million in claims from restricted jurisdictions, including China, Russia, and Ukraine, remain ineligible for distribution. Legal advocates, such as creditor champion Sunil Kavuri, have highlighted the exclusion of these claims, with some creditors pursuing legal action to challenge regional restrictionsFTX News: Next Distribution Set on 30th Sep After Today’s Record …^[2]. Additionally, valuation disputes persist, as repayments are calculated based on November 2022 crypto prices, when Bitcoin traded between $16,000 and $20,000. Current Bitcoin prices exceed $120,000, leading some creditors to argue for valuations based on present market conditionsFTX Announces September 30 Date for Next $1.9 …^[4].

The third distribution represents a significant milestone in FTX’s bankruptcy proceedings, which began after the exchange’s collapse in November 2022. To date, FTX has returned nearly $6.2 billion to creditors. The reorganization plan allows for total repayments of up to $16.5 billion, including full principal plus 9% interest for most non-governmental creditorsFTX Announces September 30 Date for Next $1.9 …^[4]. However, challenges remain, including the liquidation of remaining assets and ongoing legal battles related to claim validity and regional exclusions.