$1.2 Billion Returned: FTX Creditors See First Round of Payments

Introduction of FTX Repayments

The Bahamian division of the defunct cryptocurrency exchange FTX, FTX Digital Markets, has begun paying back its creditors. The first set of creditors will get their money on February 18.This is a major development following the collapse of FTX, which shook the crypto market to its core and caused losses of over $9 billion.

Over 130 subsidiaries filed for bankruptcy as a result of FTX's collapse, making it one of the most challenging periods in the industry's history. During what is considered to be the longest crypto winter ever, the price of Bitcoin dropped to roughly $16,000. The collapse exposed the flaws in the industry and had an impact on both institutional and ordinary investors.

FTX’s Bahamas unit is now repaying creditors with claims under $50,000. These payments will be distributed at 3:00 PM UTC on February 18. The plan was shared by Sunil, a member of the FTX Customer Ad-Hoc Committee, on February 4. Sunil, who represents one of the largest groups of FTX creditors, announced the development through an X post.

Source: X

Capital Return to Defrauded Users

An estimated $1.2 billion will be returned to creditors in this initial round of repayments. For users affected by the exchange’s collapse, this repayment represents a step toward resolving the financial damage caused by FTX’s mismanagement. It is a significant move for both the creditors and the broader crypto industry.

The repayments are being seen as a positive sign of recovery for the crypto industry. According to Alvin Kan, COO of Bitget Wallet, the refunded capital may increase liquidity in the market. Some recipients are expected to reinvest their funds into crypto, potentially boosting prices. However, Kan also noted that while investor sentiment might improve, there are mixed emotions because the payouts are based on lower 2022 valuations.

Beyond financial recovery, these repayments carry psychological significance for investors. They show progress after the FTX collapse, which shook trust in the crypto market. Alvin Kan pointed out that the scale of this repayment has implications for both capital flow and investor confidence.

Source: X

Despite the positive developments, some creditors have criticized the repayment model. Claims are being reimbursed based on cryptocurrency prices at the time of bankruptcy in November 2022. Since then, Bitcoin prices have risen by over 370%, leaving creditors with significantly lower payouts than they might receive today.

While the repayments are a milestone, their impact on the overall market may remain limited. Public relations manager Magdalena Hristova from Nexo explained that the first payouts might not be a market-moving event. However, for retail investors, these repayments provide much-needed peace of mind and a sense of stability after the turbulence caused by the collapse.

The initial round of repayments, limited to creditors with claims under $50,000, is unlikely to drive significant reinvestment into crypto. Many recipients may choose to invest in safer assets rather than reenter the volatile crypto market.

The repayment process is far from complete. Larger creditors are still awaiting updates on their claims. While this first step is meaningful, the journey to full repayment and recovery will take time.

The first round of FTX repayments signals progress for the creditors and the crypto industry. Although criticisms of the payout model remain and the market impact may be small, the repayments represent a step toward rebuilding trust and stability in the industry.