FTX begins paying users with less than $50,000 claim, others in May

Collapsed cryptocurrency exchange, FTX has announced that it has started paying users with claims below $50,000 have started receiving their payouts, which include 9% annual interest accrued since November 2022.

According to an announcement made yesterday, creditors are scheduled to receive roughly 119% of their adjudicated claim value, according to the bankruptcy plan. Under FTX’s recovery plan, 98% of creditors are expected to receive at least 118% of their claim value in cash. 

Two crypto exchanges, Kraken and BitGo are facilitating the repayments in U.S. dollars. To participate in the distribution, creditors must complete Know Your Customer verification, submit the required tax forms, and onboard with BitGo or Kraken. FTX also warned users of potential phishing emails posing as official communications.

Multiple users on the FTX subreddit have reported receiving funds on accounts on the crypto exchange Kraken with the added interest on top.

Creditors with claims exceeding the $50,000 threshold are set to begin receiving their payments in the second quarter. According to the announcement, the next repayment distribution will take place on May 30 for holders of allowed claims of “Class 5 Customer Entitlement Claims and Class 6 General Unsecured Claims.”

These will include customers who had assets on the platform when it collapsed and other creditors, such as vendors and trading partners. According to Sunil Kavuri, an FTX creditor and advocate, it requires creditors to have verified claims by April 11 — the record date to qualify for distribution.

The payout in May 2024, the exchange estimated the distribution’s total value to range between $14.5 billion and $16.3 billion.

“FTX appreciates our customers and creditors’ patience and collaboration throughout this complicated process,” John J. Ray III, plan administrator of the FTX Recovery Trust, said in a statement. “Our work is not over — we intend to continue our recovery efforts and return funds to additional claim classes.”

FTX repayment four months after court approval

Recall that FTX filed for bankruptcy in November 2022 after its co-founder, Sam Bankman-Fried, shut down the company’s platform and handed control to insolvency experts. Sam Bankman-Fried took funds belonging to customers to pay off risky bets made by his hedge fund, Alameda Research. 

He was later convicted of fraud in March 2024 been sentenced to 25 years in prison.

The defunct crypto platform received court approval to fully repay customers from its recovered assets worth $16.5 billion in October 2024. The plan, approved by U.S. Bankruptcy Judge, John Dorsey, is built on a series of settlements with U.S. government agencies, customers, creditors and liquidators appointed to process its external operations.

As part of the court ruling, FTX was granted permission to use its assets to pay customers off before paying competing claims filed by government regulators. The crypto company plans to repay 98% of its customers, especially those who hold $50,000 or less on the exchange within 60 days after the plan’s effective date.

Similarly, the company was in talks with the country’s Department of Justice on the $1 billion seized during the trial and prosecution of Bankman-Fried. In place of this, funds up to $230 million will be received by shareholders as per the court documents where they wouldn’t have originally received any funds in a normal bankruptcy proceeding.

Recall that some customers responded negatively to the plan, with many expressing disappointment that FTX’s demise caused them to miss out on a strong rebound in crypto prices since the market bottomed out in 2022.

However, FTX said that it was not possible to simply return the crypto assets customers had deposited, because customers’ assets were gone, misappropriated by Bankman-Fried. At the time of its bankruptcy filing, FTX.com held only 0.1% of the bitcoin that its customers believed they had deposited on the exchange, according to the company.