FTX’s $16 Billion Payout Imminent: How will the market be affected?

1. Introduction

FTX, once the fastest-growing CEX unicorn in crypto history with a daily peak trading volume exceeding $6.6 billion and a total token market cap of $26 billion, collapsed spectacularly, accelerating the end of the last bull market. As FTX begins compensating its investors, the “ammo cache” for the second half of the bull market is about to open.

According to an official email, PwC, the FTX liquidator, released an update on the liquidation process. Customers of FTX or FTX International can file claims in either the Bahamian or U.S. proceedings. At this stage, if the bankruptcy protection plan is approved, customers can expect to receive between $1.19 and $1.43 per dollar claimed.

For customers who have submitted proof of debt claims in the Bahamian proceedings, FTX will confirm whether they wish to continue managing, processing, adjudicating, and resolving their claims there. Customers who have not yet submitted proof of debt claims in the Bahamian process can do so before the deadline, currently expected to be mid-August 2024.

Public information shows that FTX plans to distribute over $16 billion to its creditors. Key dates are as follows:

1. August 16: FTX customer voting deadline.
2. October 7: Judge Dorsey to decide on plan approval.

Once approved, FTX will repay creditors within two months, with the implementation period being Q4 2024 to Q1 2025. This repayment, along with rate cuts and the U.S. presidential election, will bring more positive factors to the crypto market by the end of the year. Given that most FTX customers are crypto enthusiasts, the injection of $16 billion into the crypto market will act as a catalyst for price increases.

2. Key Payout Dates to Watch

Note: The payout process is subject to uncontrollable factors, such as creditor disputes over whether to compensate in fiat or tokens.

1. July 10 (Past): Deadline for debtors to send voting packages and related documents to creditors.
2. July 16: Deadline for submitting Rule 3018 motions if creditors request to temporarily allow or change their voting rights.
3. August 9: Deadline for submitting supplemental plan documents.
4. August 16: Deadline for filing confirmation objections.
5. August 16, 4:00 PM EST: Voting deadline.
6. 7 days before the confirmation hearing: Deadline for filing voting reports and responses to confirmation objections.
7. October 7, 10:00 AM EST (Tentative): Proposed date for the confirmation hearing.

3. Remaining Uncertainties

Recently, lawyers overseeing FTX’s bankruptcy case submitted a reorganization plan that promises almost full compensation to nearly all customers, with an additional 18% interest. If most creditors and the bankruptcy judge agree, payments will be made within two months. However, creditors have expressed dissatisfaction and concerns about the following aspects:

Dissatisfaction with the Reorganization Plan

Some creditors are unhappy as they won’t get their original cryptocurrencies back but will be compensated in dollars based on the value at the time of FTX’s bankruptcy filing in November 2022. They believe this deprives them of potential gains, given the increase in cryptocurrency prices since then.

Accusations of Low-Price Asset Sales

Creditors accuse FTX of selling some assets, such as LedgerX and a large amount of SOL tokens, at low prices before the bankruptcy, harming their interests.

Concerns About FTX 2.0 Plan

Some creditors believe FTX could have gained additional value by restarting its trading platform. However, FTX claims they explored the possibility but found no willing investors.

Unpursued Claims

Creditors are worried FTX may not pursue all deserved claims, such as those against Binance. FTX states investigations and lawsuits are ongoing but no final decision has been made regarding Binance.

Opposition to the Reorganization Plan

Some creditors object to specific terms of the plan, such as the allocation method and governance structure, claiming it favors FTX’s management team and lacks creditor oversight.

4. Conclusion

It has been two years since FTX’s collapse. Although investors are set to receive nearly 1.18 times the nominal value in compensation, they’ve paid a high price in time and effort. While asserting their rights, creditors must realize that with most assets liquidated, FTX’s USD-based assets have lost the potential for high returns in a bull market.

Returning to the main point, if the current compensation plan proceeds, approximately $16 billion will enter the crypto market in early Q4, undoubtedly boosting market liquidity and investor confidence.