FTX Starts Repayments, Sparking Crypto Controversy

FTX, the once-thriving cryptocurrency exchange that collapsed in late 2022, has initiated repayments to its creditors, marking a significant milestone in its bankruptcy proceedings. The initial payout, totaling $1.2 billion, targets smaller claims under $50,000. However, the repayment plan has sparked controversy, particularly among holders of Bitcoin and Solana, as FTX has decided to use asset values from November 2022 to determine payouts.

FTX's repayment plan allows the exchange to "lock in" repayment values based on November 2022 market prices, aiming to provide stability in the volatile crypto environment. However, this method has left many creditors feeling shortchanged, especially given the significant price increases of some assets since then. Bitcoin, for instance, trades at $97,988 today, a stark contrast to the $20,000 baseline used by FTX for payouts. Similarly, Solana, which had strong ties to FTX, has seen a price uptick from nearly $22 at the time of FTX's collapse to more than $180 today, representing a more than 700% increase. Yet, FTX's repayment calculations are based on the value of Solana at the time of its collapse, leaving creditors with far less than what they would receive if current market prices were used.

On January 3, 2025, a plan of reorganization was approved for FTX, instructing the company to pay back $16 billion to creditors in staged payments. The first stage, which occurred in the first week of March, saw the company pay out about $1.2 billion to a constellation of creditors. However, FTX has set aside 50% of the $16 billion to be withheld for disputed claims, which may cause delays for some creditors as their claims are reviewed and contested. Crypto custodian BitGo has been entrusted with managing the fund distributions, and all repayments are expected to be completed within 60 days of the reorganization plan taking effect.

Besides repaying creditors, FTX will release a significant quantity of tokens from its bankruptcy estate on March 1, 2025. Specifically, 11.2 million SOL tokens, worth about $2.06 billion at today's