FTX Rumored Repayment of “FTT Surges 80%” from 9/30 – Fact Check: Plan Not Court-Approved, Earliest Launch by Year’s End
Social media is ablaze with rumors today that the bankrupt cryptocurrency exchange FTX will begin compensating creditors and clients on September 30. However, this is purely speculative as the court confirmation hearing for the repayment plan is scheduled for October 7, and the plan is still awaiting court approval.
The restructuring team of bankrupt cryptocurrency exchange FTX announced last month that the overwhelming majority of creditors have approved their repayment plan. The FTX liquidation team will submit the final voting results to the Delaware Bankruptcy Court before the confirmation hearing scheduled for October 7. Upon court approval, the repayment process is expected to commence within a minimum of 60 days.
FTX Distribution Start Tomorrow: A Misinformation
“$16B FTX DISTRIBUTION STARTS TOMORROW. Send it! 🚀” – Radar🚨 (@RadarHits) September 29, 2024
According to a report from Cointelegraph, Judge John T. Dorsey of the United States Bankruptcy Court for Delaware will preside over the confirmation hearing on October 7. If approved, creditors with claims less than $50,000 could start receiving compensation by the end of 2024, while larger creditors may have to wait until the first or second quarter of 2025.
As per the current plan by the restructuring team, FTX plans to compensate creditors with cash or stablecoins pegged to the US dollar. Following the sale of all assets, FTX is expected to have up to $145 billion to $163 billion in cash for distribution, with around $112 billion owed to customers and other non-government creditors. However, the compensation for losses is based on the platform’s funds under Chapter 11 bankruptcy. Therefore, unless the assets held on FTX are stablecoins, users could still incur significant losses.
FTX creditors led by Sunil Kavuri have raised multiple objections to the repayment plan, including the demand for physical cryptocurrency compensation and opposition to cash payments due to tax implications. FTX’s lawyers argue that creditor compensation must be in cash to avoid conflict with existing Chapter 11 bankruptcy laws, which could hinder the restructuring process.
Additionally, a report from The Block reveals that FTX has agreed to allocate up to $230 million from proceeds obtained through government seizures to repay certain shareholders. This move has left creditors disgruntled as, typically in bankruptcy proceedings, they should have priority over shareholders for compensation. The agreement, signed on August 28 but disclosed only on September 27, assigns 18% of all proceeds from government seizures to a dedicated fund for “certain shareholders’ exclusive benefits.”
According to Forbes analysis, FTX is expected to return $110-160 billion in funds to creditors in the fourth quarter of 2024. If the restructuring plan confirmation hearing is approved, FTX will have 60 days to distribute assets to creditors, meaning cash returns could begin reaching creditors by a date before December 7. Creditors may reinvest these funds in favored tokens or ETFs.
The recent reports of FTX planning to distribute $160 billion to creditors in Q4, coupled with social media speculation about the September 30 repayment launch, have potentially influenced the surging value of FTT. Last night, FTT skyrocketed from 8 cents to a high of $2.71, a surge of over 80%. Currently, it is trading at $2.41, marking a 70% increase in the last 24 hours.
Simultaneously, concept coins related to bankruptcy saw a general rise, with USTC trading at $0.02332, a 25.04% increase in 24 hours; LUNA at $0.4480, an 8.90% rise; and LUNC at $0.00009893, a 10% increase in the last 24 hours.
