FTX Distribution Payments Will Not Start on Sept. 30

Speculation has been swirling online that the FTX bankruptcy estate will begin distributing reimbursement funds to creditors and customers on September 30. However, this information is inaccurate, as no reimbursement plan has been given legal approval at this time.

As per the most recent Chapter 11 filing, the next court hearing to confirm the restructuring plan is set for October 7. This hearing will be presided over by Judge John T. Dorsey of the United States Bankruptcy Court for the District of Delaware.

Should the plan receive court approval, creditors with claims under $50,000 might start seeing payments by late 2024. Those with larger claims, however, may not receive funds until the first or second quarter of 2025.

The distribution plan faces opposition from creditors

A group of FTX creditors, led by Sunil Kavuri, has raised several objections to the current reorganization proposal. Among their concerns are requests for compensation in the form of in-kind assets, instead of cash, as well as objections over the taxable consequences of receiving cash payments.

FTX’s legal team, on the other hand, argues that distributing cash is necessary to comply with Chapter 11 bankruptcy regulations. They warn that deviating from this process could disrupt the proceedings. However, the debate over whether creditors should be paid in cash or crypto remains heated, with creditors asserting that only in-kind payments will fully compensate them and former customers for their losses.

Under the existing plan, reimbursements would be calculated based on the value of Bitcoin at the time the legal petition was filed, when Bitcoin’s price was about $16,000. This would result in creditors receiving only around 25% of their original holdings, according to Kavuri.

Market impact of FTX distribution payments

Markus Thielen, founder of 10x Research, has suggested that the eventual FTX payouts could positively influence the broader market.

Thielen said that the reimbursement could inject between $5 billion to $8 billion into the market, potentially increasing demand and driving prices higher.

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