FTX to Begin Major Repayments on May 30 Amid Controversy Over Crypto Valuations
After more than two years of legal battles and financial turmoil, FTX is set to begin repaying creditors on May 30, marking a crucial step in resolving its bankruptcy case. However, many creditors are expressing frustration over the valuation method being used, which significantly underestimates their holdings compared to current market prices.
FTX to Repay Over $50,000 in Claims Starting May 30
FTX, which collapsed in early November 2022, has amassed $11.4 billion in cash and is now preparing to distribute repayments to creditors with claims exceeding $50,000. Bankruptcy attorney Andrew Dietderich, speaking on behalf of the company’s current CEO, John Ray III, confirmed that FTX will make its first major payments at the end of May.
Dietderich also noted the sheer volume of claims filed against the defunct exchange, estimating the number to be in the "27 quintillion" range, many of which he dismissed as fraudulent or baseless.
The Issue of Cryptocurrency Valuation
While FTX has assured creditors that they will receive approximately 118% of their claims in cash, the catch lies in the valuation date. The exchange is using the prices from its bankruptcy petition date, November 11, 2022, to determine payouts. Since then, major cryptocurrencies have seen explosive growth:
- Solana (SOL): Up roughly 650%
- XRP: Increased by about 450%
- Bitcoin (BTC): Grown nearly 500%
- Ethereum (ETH): Up 47% despite recent struggles
This means that while creditors will technically be repaid in full, their compensation does not reflect the massive appreciation in digital asset values over the past two years.
Creditors Express Mixed Reactions
Sunil Kavuri, a representative of the largest FTX creditor group, acknowledged that repayments will provide much-needed closure but criticized the valuation method. "Repayment is at petition date prices... so holders are not [at] full recovery in crypto terms," he stated. Many creditors who held substantial crypto holdings on FTX feel shortchanged, as their repayments will be significantly less than what they could have gained had they retained their assets elsewhere.
The Race Against Time
To address creditor concerns, FTX will also add a 9% annual interest rate on claims while repayments are being processed. However, with the repayment process potentially stretching over several months, delays could further impact the final amounts creditors receive.
FTX's bankruptcy saga has been one of the most high-profile financial collapses in the crypto industry, and while repayments signal progress, lingering dissatisfaction over valuation discrepancies means the story is far from over.