FTX To Distribute Over $5B To Creditors In Second Round Of Payouts On May 30

The FTX Recovery Trust will distribute more than $5 billion to creditors starting May 30, as part of its second payout under the Chapter 11 bankruptcy plan.

This marks a significant step in addressing claims from the collapse of FTX, the cryptocurrency exchange that imploded in November 2022.

The FTX collapse, one of the largest failures in crypto history, stemmed from allegations of mismanagement and fraud under former CEO Sam Bankman-Fried.

The exchange, once valued at $32 billion, filed for bankruptcy after a liquidity crisis exposed a shortfall in customer funds.

Bankman-Fried was later convicted of fraud, misappropriating $10 billion in customer assets, leading to a 25-year prison sentence.

The fallout left thousands of customers and creditors awaiting repayment, with the Recovery Trust tasked with recovering and distributing assets.

The second distribution targets holders of allowed claims in various classes who have met pre-distribution requirements.

Funds will be disbursed through Bitgo or Kraken, with payments expected within one to three business days from May 30.

John J. Ray III, the plan administrator, described the distribution as a milestone, noting the complexity of managing claims for a vast creditor base. He emphasized ongoing efforts to recover additional assets and resolve remaining claims.

Eligible creditors must complete Know Your Customer verification, submit tax forms, and onboard with a distribution service provider via the FTX Customer Portal.

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Those with transferred claims must ensure their details are updated with the claims agent. FTX warned of phishing scams, advising customers to verify communications and avoid connecting wallets to suspicious sites.

The distribution prioritizes different claim classes, with convenience claims receiving 120%, while customer and unsecured claims range from 54% to 72%.

Future distribution dates will be announced, with similar requirements for eligibility. Separately, FTX Digital Markets Ltd. will handle claims for its customers.

FTX's downfall began when a November 2022 report revealed that Alameda Research, a hedge fund linked to Bankman-Fried, held significant illiquid assets tied to FTX's native token, FTT.

A subsequent run on customer withdrawals exposed FTX's inability to cover deposits, triggering bankruptcy.

Investigations uncovered that customer funds were misused to cover Alameda's losses, leading to widespread financial harm.

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