FTX Users Receive 74% Payouts In $5 Billion Distribution

BitGo and Kraken have commenced the distribution of approximately $5 billion in payouts to former users of the defunct cryptocurrency exchange FTX. This marks the second round of repayments as part of FTX's Chapter 11 restructuring process, which was announced earlier. The payouts are being managed through the FTX Recovery Fund, which is responsible for compensating creditors and clients affected by the exchange's collapse.

FTX Trading Ltd., the parent company of the bankrupt crypto exchange, had previously announced that it would begin distributing more than $5 billion to creditors starting on May 30. This distribution is part of the second phase of its Chapter 11 reorganization plan. The exchange has been able to make customers "whole," i.e., return the dollar value of their accounts at the time of bankruptcy in November 2022, due to the sizable returns on some of the FTX estate’s holdings, such as stakes in firms like AI studio Anthropic and brokerage Robinhood, as well as massive stockpiles of tokens like SOL and SUI.

Users are expected to receive 74% of the dollar value of their account holdings on this distribution, with additional payments planned for later. Small claim holders are expected to receive at least 119% of their allowed claim value, including interest payments. The overall repayment plan aims to distribute between $14.7 billion and $16.5 billion, with recoveries varying based on claim type and valuation.

However, the repayment plan has been met with mixed reactions. Some former users would have preferred to receive "in kind" distributions of crypto assets, which, given the significant appreciation of the crypto market since FTX's collapse, would be more valuable today. This preference stems from the belief that receiving crypto assets directly would yield higher returns compared to the current payouts.

The distribution process involves both convenience and non-convenience classes of claims. Users who have completed the required Know Your Customer (KYC) verification process are eligible to receive their payouts. Notably, convenience claims may receive up to 120% of their original holdings, reflecting the efforts to fully compensate users for their losses.

The involvement of BitGo and Kraken in this distribution underscores the collaboration between major players in the cryptocurrency industry to address the fallout from FTX's bankruptcy. BitGo, a digital asset trust and security company, and Kraken, a prominent cryptocurrency exchange, are playing crucial roles in ensuring that the payouts are distributed efficiently and securely.

This development is significant for the broader cryptocurrency community, as it represents a step towards resolving the financial impact of FTX's collapse. The distribution of $5 billion in payouts is a substantial effort to restore confidence in the industry and provide relief to those who were affected by the exchange's insolvency. The process highlights the importance of regulatory oversight and transparency in the cryptocurrency sector, as well as the need for robust mechanisms to protect investors and users.