FTX сreditors reveal compensation details: What’s wrong with it?

The news that FTX clients would receive 10% to 25% of the value of deposited crypto assets confused users. Why did this happen?

Sunil Kavuri, one of the creditors, recently said that other changes are planned in the restructuring plan. One of the issues regarding the amount of compensation paid to the victims raised questions in society.

What is known about the compensation plan

Crypto assets deposited on the platform will be valued at the exchange rate at the time of the bankruptcy filing. Therefore, the actual compensation will be between 10% and 25% of the market value of the cryptocurrency.

FTX transfers 18% of DOJ forfeiture funds up to $230 million to FTX stockholders (Plan attachment)

FTX crypto holders get 10% to 25% of their crypto back pic.twitter.com/3f6BePpoNU

— Sunil (FTX Creditor Champion) (@sunil_trades) September 28, 2024

FTX shareholders will also receive 18% of the funds seized by the US Department of Justice, but no more than $230 million. This became an additional clause on increasing the share of preferred shareholders.

However, many people expressed dissatisfaction with the payment terms and called it a scam. One user suggested that this payout schedule may be because most FTX shareholders are clients of either Sullivan & Cromwell (representing FTX debtors) or Quinn Emanuel, who is serving as conflict counsel to FTX’s new management. Both law firms are working to recover the assets of clients of the bankrupt exchange.

Community speculates on timing of compensation payments

Efforts are ongoing to return funds to account holders affected by the FTX crash. Amid speculation regarding the timing of payments, information has emerged on the network that FTX crypto holders may start receiving payments as early as September 30.

However, this was soon denied; According to the most recent data available from Chapter 11 bankruptcy case materials, the court is still working on a compensation plan.

Application to the court. Source: X

Court filings show the next hearing to approve the restructuring plan is scheduled for Oct. 7. If the court approves the plan, payments could begin in late 2024 for claims under $50,000.
others will receive compensation in the first half of 2025.

FTT Reacts with Growth

After the latest news, FTX made investors happy. Investors have become more optimistic, hoping that the notorious crypto exchange will soon start returning funds. Such an event could lead to a $16 billion inflow into the market.

FTX token (FTT), which reached its peak on September 29, gained 113% in value in one day. By the end of the day, the price corrected and dropped to $2.11 at the time of writing.

FTT token price. Source: CoinGecko Where did customer funds go?

FTX, once valued at $32 billion, used client funds for risky investments through closely affiliated hedge fund Alameda Research. Investigations revealed that the company used customer funds to cover losses at other related businesses and finance risky investment deals.

FTX’s massive budget deficit was revealed after customers demanded their money back. Following the bankruptcy of FTX, the restructuring process was initiated and the process of returning funds to customers began. However, at that time, the exact reasons for the disappearance of the funds and where they were sent remained the subject of investigation. In total, the stock market has about $9 billion in debt.

Victims are waiting, defendants are serving their sentences

FTX’s bankruptcy shook the crypto market and affected the prices of many coins. It has also raised concerns among users and regulators about the security and liability of crypto exchanges. In addition to creating a repayment plan, the top executives of the exchange are also punished one after another.

Bankman-Fried was charged with fraud, money laundering and other financial crimes related to FTX management and customer payments. The charges are based on allegations that he used client funds to support his other businesses, including trading firm Alameda Research. He was sentenced to 25 years in prison in March.

Caroline Ellison, former CEO of Alameda Research, was sentenced to two years in prison and forfeited $11 billion on fraud and money laundering charges. Active cooperation in the Bankman-Fried investigation mitigated the verdict. The judge emphasized that the collapse of FTX was one of the most significant financial crimes and that Ellison’s cooperation did not relieve him of responsibility. He admitted his guilt and apologized to the victims.

Following the former Alameda CEO’s decision, other defendants are now awaiting court decisions: FTX co-founder and CTO Gary Wang, as well as head of engineering Nishad Singh.