The Payment Process for Creditors of the Bankrupt Crypto Exchange FTX Begins
Users affected by the collapse of the crypto exchange FTX will be able to receive distributions through Kraken and BitGo under a bankruptcy plan effective January 3, 2025. FTX announced that the "initial distribution" will take place within 60 days from the effective date. The company stated that it has been working for the past two years to recover billions of dollars, marking this phase as a significant achievement.
John J. Ray III, CEO of FTX Bankruptcy Debtors, emphasized that the recovery efforts are a commendable success. The first distribution will commence in January 2025. Previously, Sunil Kavuri, a representative of FTX's largest creditor group, stated that Kraken and BitGo were identified as distribution partners, and a third partner would be announced soon. It was also noted that funds could be distributed in stablecoins.
Role of Kraken and BitGo in distribution Kraken indicated that it has experience in assisting with fund distribution to Mt. Gox creditors in the past. Mt. Gox, established in 2010, had become the world's largest Bitcoin exchange but lost 850,000 Bitcoin due to a security breach in 2014. Kraken mentioned that it became involved after this incident to support the investigation and again took on a role in fund distribution for Mt. Gox creditors in 2024.
BitGo stated that it has been safeguarding billions of dollars in crypto assets for institutional clients for years, prioritizing security and transparency. BitGo CEO Mike Belshe expressed pride in supporting FTX and highlighted that they provide institutional-grade services to both individual and corporate clients. BitGo’s security enables clients to manage their assets safely.
Judicial ruling and the status of creditors U.S. Bankruptcy Judge John Dorsey of the Delaware District approved FTX's bankruptcy plan in October. This plan anticipates that 98% of creditors will receive at least 118% of their claimed values in cash. Among the creditors in the "Dotcom customer claims" class, 94% approved the restructuring plan, amounting to a total claim of $6.83 billion.
However, Sunil Kavuri criticized the plan, arguing that assets should be returned in cryptocurrency. FTX filed for bankruptcy at the end of 2022. Exchange CEO Sam Bankman-Fried was convicted of seven counts in November 2023 and sentenced to approximately 25 years in prison. The CEO of FTX's affiliate Alameda, Caroline Ellison, was also sentenced to two years in prison.