FTX Refund Woes Persist as Creditor Deadline Extended

FTX Digital Markets has opted to extend the deadline for creditors to submit proof of debt, offering them more time to navigate the claims process. Initially, creditors were mandated to submit their claims by a May 15 deadline, but they now have until the end of July or early August to do so, FTX told its customers and creditors in a letter.

This extension grants creditors an additional 10-12 weeks to file claims within the Bahamas procedure. The move recognizes the complexity of gathering the necessary documentation and aims to facilitate a smoother claims submission process.

FTX customers face a decision between participating in the Bahamas procedure or the U.S. procedure, with the option to select one but not both concurrently. A comprehensive disclosure document outlining the implications of each procedure will be disseminated in June, affording creditors 6-8 weeks to deliberate and make an informed choice.

The Refund Plan

According to FTX’s legal team, former users who had less than $50,000 in assets on the exchange when it collapsed will receive full repayment, plus interest—up to 118% of their assets’ value. This move is expected to benefit the vast majority of affected customers, as 98% fall into this category.

However, there’s a catch. The plan hinges on approval from a Delaware bankruptcy court, where FTX’s proceedings are underway. Additionally, customers who lost assets missed out on substantial capital gains during the recent crypto market recovery. For instance, when FTX collapsed in November 2022, Bitcoin was trading below $20,000; today, it’s north of $62,000.

FTX’s collapse occurred during a volatile period in the crypto market. The exchange faced liquidity challenges, leading to its downfall. While the proposed refund plan is a relief for users, the company still owes billions to creditors. FTX is believed to have collected between $14.5 billion and $16.3 billion for distribution.

The plan’s potential to fully reimburse creditors at November 2022 prices, along with interest, is remarkable. FTX’s estate owes approximately $11 billion, making the proposed returns “really unheard of” in bankruptcy cases.