Crypto: Why Won't FTX Clients Be Reimbursed 100%?

FTX customers, after two long years of waiting, realize that this period is nothing compared to the ten years of their Mt. Gox counterparts. Yet, the hope of recovering 100% of their assets has collapsed, leaving a bitter taste. The latest amendment to the repayment plan announces a distribution ranging from 10% to 25% for FTX crypto holders, a major blow for affected traders.

FTX surprises its creditors with minimal repayment

It was said that FTX would reimburse its clients in bitcoin at prices below $18,000. But the surprise was total for FTX creditors when the distribution of funds was changed to their detriment. Initially, the expectation of a full refund seemed realistic, but the new plan only provides for 10% to 25% restitution of the lost assets.

Even more surprising, $230 million from government seizures will be allocated to shareholders, a situation which should, according to usual bankruptcy rules, prioritize the creditors.

As stated by Sunil Kavuri, activist and FTX creditor, “FTX is transferring 18% of the funds from DOJ seizures to FTX shareholders“, a decision that has caused a wave of discontent among crypto holders.

FTX is transferring 18% of DOJ forfeiture funds up to $230m to FTX equity holders (Plan supplement)

FTX crypto holders are getting 10% to 25% of their crypto back pic.twitter.com/3f6BePpoNU

— Sunil (FTX Creditor Champion) (@sunil_trades) September 28, 2024

Creditors feel betrayed, and some have not hesitated to express their frustration on social networks. One of them expressed it this way:

“They quietly slipped this provision into the plan after the vote, it’s disgusting“.

Tensions continue to rise as investors understand that their recovery hopes are much more limited than initially promised.

• $230 million redistributed to shareholders;
• Only 10% to 25% for crypto creditors;
• The price of Bitcoin at the time of the filing was $16,000.

Crypto in turmoil: FTT surges despite tensions

While the FTX case ruffles feathers, another surprising phenomenon has shaken the crypto market: the sudden surge of FTT, the native crypto of the platform. In 24 hours, it skyrocketed by 60%, with trading volume rising by 3734%.

This unexpected rebound is all the more troubling as FTT had plunged by more than 90% after the revelations of FTX’s fraudulent activities and the company’s bankruptcy in 2022.

This spectacular rise leaves many market watchers perplexed, especially as FTT no longer has any intrinsic value. For traders, this turnaround serves as a reminder that the altcoin market remains highly speculative, and this explosion seems more like chance than any renewed confidence in the company.

“We are witnessing a kind of frenzy that corresponds to nothing concrete“, explain some analysts.

FTX creditors see no benefit in this surge, still stuck waiting to recover a fraction of their funds.

Thus, the redistribution of $16 billion by FTX is likely to cause upward pressure on influential cryptocurrencies like Bitcoin and Solana, redefining market dynamics.