FTX Bankruptcy: Key Dates For The $16 Billion Payout And Potential Market Effects

On Monday, a US bankruptcy court officially approved the liquidation plan for cryptocurrency exchange FTX, allowing the company to repay its customers using approximately $16 billion in recovered assets. 

This decision comes at a critical time for the crypto market, as creditors are poised to receive more than $12 billion through the court-sanctioned payout plan, raising the possibility that some of these funds could be reinvested into the digital asset ecosystem, potentially influencing market prices.

In June, FTX reported having $12.6 billion available for customer repayments, a figure that could increase to $16.5 billion as additional assets are identified and liquidated. 

The initial distribution of around $1.1 billion, while relatively modest, is expected to provide support for Bitcoin (BTC) and other cryptocurrencies such as Solana (SOL) and Ethereum (ETH), according to Alex Thorn, the head of research at Galaxy Digital Holdings.

Benjamin Celermajer, co-chief investment officer at Magnet Capital, also noted that the upcoming payouts “effectively provide liquidity to known crypto traders”. He highlighted the likelihood that some of these funds will flow back into the cryptocurrency market, potentially acting as a price catalyst for “liquidity-starved assets.”

However, it is important to note that the repayments from FTX will not occur immediately. Bloomberg reports that the exchange must establish a trust and hire a company to oversee the distribution process. 

Galaxy Digital says payments to smaller creditors may begin as early as December, while larger claims will be addressed in the first half of next year. Some remaining claims could take up to three years to resolve.

Research firm K33 has estimated a “latent demand from FTX reallocators” of around $2.4 billion. However, they caution that the impact on the crypto market may be “soft” due to the staggered nature of the repayments expected over the next year.

In a related development, Caroline Ellison, the former CEO of FTX’s trading arm, Alameda Research, has agreed to hand over her assets to the exchange’s debtors to settle a claim brought against her by the FTX bankruptcy estate. 

Ellison has reached a settlement that includes the transfer of her assets that have not already been confiscated by the government or used for legal fees, FTX said in a court filing on Monday. 

Ellison, who is also the former romantic partner of the now convicted Sam Bankman-Fried, also agreed to cooperate with the bankruptcy estate in current and future investigations. Upon completion of the settlement, Ellison will retain only certain physical personal property.

When writing, the defunct exchange’s native token FTT is trading at $2.25, down from an 8-month high of $3 reached after the bankruptcy plan was approved on Monday.  

Featured image from DALL-E, chart from TradingView.com