The bankrupt cryptocurrency exchange FTX has announced its latest creditor compensation plan this month, which is expected to pay a 9% annual interest rate to the majority of creditors. However, this has raised questions as to why FTX, which involves such a large amount of money and a wide user base, can progress its liquidation process so quickly.
Summary:
FTX victims can receive an additional 18% interest, but most creditors criticize it as a deceptive move, leading to further losses.
Background:
FTX liquidation progress: Full compensation promised, but victims shouldn’t celebrate too early. Selling off SOL, repayment to begin in September at the earliest.
FTX, the bankrupt cryptocurrency exchange, recently announced its latest compensation plan, estimating that it owes approximately $11.2 billion. However, after selling off its assets, it will have approximately $14.5 billion to $16.3 billion in cash for compensation. Therefore, it can not only achieve full refunds but also provide an annual interest rate of approximately 9% to the majority of users (those who previously held funds of less than $50,000).
However, it is important to clarify that the compensation calculation is based on the funds held by FTX on the day it filed for bankruptcy under Chapter 11. Therefore, unless users’ assets held in FTX are stablecoins, they will still suffer significant losses (BTC was only valued at $17,000 at that time).
Although some FTX creditors are dissatisfied with this plan, considering the progress of the liquidation process since FTX declared bankruptcy in November 2022, it is actually quite fast compared to other bankruptcy cases in the cryptocurrency field (for example, the repayment of Mt.Gox took a whole ten years…).
At the same time, this has raised questions in the community as to why FTX, with such a large amount of money involved and a wide user base, can progress its liquidation process so quickly.
Lawyer: FTX is an “exception”
According to Blockworks, Jonathan Groth, a partner at DGIM Law Firm, stated that “FTX is an exception” after comparing it with other bankruptcy cases in 2022. Groth pointed out that FTX’s ability to repay is determined by the recovered cryptocurrency assets.
In addition, Erin Broderick, a partner at Eversheds Sutherland, also added:
What other reasons are there?
Another fact is that the cryptocurrency market officially entered a new bull market cycle at the end of last year, indirectly causing the value of FTX’s cryptocurrency assets to increase along with the market improvement, enabling FTX to convert them into sufficient cash.
In addition to the positive factors mentioned above, community members speculate that FTX’s active fundraising for creditor compensation may also be related to several scandals involving FTX founder SBF, such as FTX’s previous political donations to U.S. Congress members.
Therefore, perhaps to prevent more scandals from being exposed in the bankruptcy case and causing damage to relevant stakeholders, FTX is accelerating the liquidation process under official promotion.
However, regardless of the reasons, the progress of the liquidation is still good news for global creditors, as a longer liquidation time would result in higher costs for lawyers and accountants, and the compensation received would be relatively reduced.
Related Reports:
FTX Creditors Criticize John Ray for Concealing FTX’s Holding of 55 Million SOL, Resulting in Over $10 Billion in Losses.
Opportunity to Buy SOL: FTX Will Initiate the Second Round of Solana Auction, Retail Investors Can Also Participate.
FTX Victims Can Receive an Additional 18% Interest, but Most Creditors Criticize It as a Deceptive Move, Leading to Further Losses.