FTX Creditors May Get Just 10-25% of Funds Back

FTX creditors, who have been waiting for restitution since the platform’s collapse in November 2022, could see between 10% to 25% of their holdings returned, according to creditor activist Sunil Kavuri. This estimation comes amid ongoing concerns about the exchange’s restructuring process and what form the payouts will take—crypto or cash—as the October 7 court hearing approaches.

The update arrives as FTX shifts $230 million (roughly 18% of its seized assets) to equity holders, sparking unease among some stakeholders. Kavuri expressed doubts, saying, “This is just a rough estimate of what the petition date payout could look like compared to today’s value.” Meanwhile, rumors swirl that FTX might begin distributing as much as $16 billion to creditors starting October, though this remains unconfirmed pending court approval of the restructuring plan.

The restructuring plan has faced significant pushback. Last quarter, a $12.7 billion repayment agreement was approved, but the court prohibited both FTX and its sister company Alameda Research from trading digital assets. More recently, the U.S. Trustee raised concerns, arguing for a fairer distribution among creditors. Even FTX’s own creditors, including Kavuri, filed objections over what they believe are unfair provisions in the current plan, which allegedly prioritizes equity holders over customers.

The main issue is the broad exculpation clauses and the absence of an “in-kind” distribution option, which creditors say would reduce tax burdens. They claim that forcing cash payouts could impose unnecessary taxes on recipients. Echoing these concerns, the Securities and Exchange Commission (SEC) criticized the plan, demanding the removal of discharge provisions and threatening to oppose its confirmation if not amended.

On the market front, FTX still holds over $1 billion in Solana tokens, and ongoing liquidation could negatively affect Solana’s value. Meanwhile, if the payout begins, it could lead to a fresh influx of capital into Bitcoin and altcoins, potentially impacting their prices significantly.

As the court date draws nearer, both creditors and market participants remain on edge, waiting to see how the proceedings will unfold and what effect they may have on the broader crypto landscape. If approved, the plan could either stabilize the situation or provoke new volatility in an already turbulent market.

Ultimately, FTX’s restructuring outcome will serve as a precedent for similar cases in the future, highlighting the complex interplay of legal, financial, and regulatory issues that arise in the aftermath of such large-scale crypto failures. Creditors and investors alike are hoping for clarity, but uncertainty still clouds the path forward.