It was a good week for FTX creditors, words not many thought would be written at the end of 2022 after the crypto exchange filed for bankruptcy.
But the tides have turned for the defunct entity. For one, crypto asset prices were essentially at their lowest when FTX went under, and its crypto holdings are worth a lot more now than they were before. The bankruptcy estate has managed to sell off shares in GBTC, its stake in the AI startup Anthropic, and its locked Solana tokens, all of which helped it rake in funds to pay back creditors.
Those overseeing the bankruptcy have not always made perfect decisions; for instance, Mysten Labs bought back FTX's stake and token warrants for $96 million in April 2023, right before Sui's token launch. Had the estate opted to hold onto that for longer, it would have been worth a lot more.
But even with the slip-ups along the way, FTX released a compensation plan last week that 98% of creditors (those with claims below $50,000) would recieve 118% of their allowed claims. Other creditors are also set to receive full payment and billions more for the time value of their money lost. FTX estimates the cash it has available for distribution is somewhere between $14.5 billion and $16.3 billion.
This naturally sent FTX creditor claims above 100 cents on the dollar. Creditors can sell their claims to their payout, allowing them to get some funds back quicker, typically at a discount to what they would be expected to get if they had waited. In November 2023, it was news that claims were selling as high as 65 cents on the dollar, indicating a pretty sizable recovery was expected, as earlier in the year, people were expecting creditors to get much less in the end.
Now that everyone is expected to get paid back in full and then some, these creditor claims are also more expensive, trading at 109% as of writing.
Not everyone is happy, though. Sunil Kavuri, a representative of the largest FTX creditor group, has been advocating for creditors to vote against the most recent compensation plan.
The primary grievance is that the plan does not involve paying creditors back in cryptocurrency but rather the dollar value of their positions when the exchange filed for bankruptcy. Kavuri claims FTX has “destroyed an estimated over $10 billion” for creditors, given that asset values have appreciated significantly since the implosion.
Thomas Braziel, a partner at 117 Partners and 507 Capital and an investor in distressed assets, is not worried about pushback on the plan, though, since many claims are now owned by distressed asset investors and since a lot of the claims are stablecoin-based.
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And, of course, good news for FTX means good news for FTT. While dreams of the exchange being rebooted have been dashed, essentially voiding any potential future use of the token, there was $139 million of spot volume in FTT pairs on May 8, the day the plan was announced. It was the highest day of volume for the token since the end of December.
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