FTX to Distribute $5 Billion in Stablecoins to Creditors by 2025

FTX, the failed cryptocurrency exchange, is set to distribute $5 billion in stablecoins to its creditors by May 30, 2025. This distribution is part of a broader repayment plan approved by the United States Bankruptcy Judge John Dorsey in October 2024, which allows FTX to repay its creditors with up to $16.5 billion from the assets it has recovered.

The total claims filed by creditors amount to $11.745 million. FTX anticipates that recoveries will range from $14.459 million to $16.254 million, resulting in a recovery rate of 123% to 138% for investors. The distribution of $5 billion in stablecoins marks a first in crypto bankruptcies, with the repayment plan designed to address various groups of creditors. Those with claims of less than $50,000 are expected to receive their payouts first, while those with higher claims will be paid out in later phases starting from the second quarter of 2025.

The distribution plan has been praised for its clarity in guiding complex Chapter 11 proceedings. However, creditors have expressed frustration with the asset valuations used in the payouts, which are based on the prices of their holdings in November 2022. At that time, Bitcoin was worth $16,000, but its price has since risen to over $109,000. This discrepancy means that creditors have not benefited from the market growth seen in the past two years.

When FTX collapsed in 2022, it resulted in billions of dollars in losses for customers, with reports indicating that customers lost $8 billion. The main reason for the exchange’s downfall was that customer money was used to fund Alameda Research, a sister trading company. The upcoming distribution of stablecoins is expected to boost liquidity in the crypto market, potentially encouraging more activity and investment in cryptocurrencies.

As more stablecoins worth $5 billion enter the market, liquidity is expected to increase. A number of creditors could choose to invest extra money in cryptocurrencies, which may encourage more action in the altcoin market. This payout allows creditors to reclaim their losses and possibly place their money back into the capital market, potentially driving short-term bullish momentum in the cryptocurrency market.