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FTX, the once-prominent cryptocurrency firm, is ready to start paying back its major creditors by the end of May. After gathering a massive $11.4 billion since its collapse, the cryptocurrency firm is ready to begin making significant payouts as per a latest report from Bloomberg.
While smaller creditors with “convenience claims” have already received payments, FTX will begin paying its major debt holders on May 30, according to bankruptcy lawyer Andrew Dietderich, who informed the judge overseeing the Chapter 11 case. The main creditors of FTX are investors who are owed millions of dollars, along with institutions that had cryptocurrency stored on the FTX platform.
Massive Payout Challenge
The 2022 collapse of FTX, once a leading cryptocurrency exchange, left behind a huge number of creditors from all walks of life. While settling these claims quickly would help preserve the most value, the process is complicated by the massive number of claimants resulting from the exchange’s downfall.
What makes it worse is that Bitcoin has increased in value by more than four times since FTX’s bankruptcy, adding to the frustration of many former customers who were hoping to be repaid in digital assets instead of cash.
Paying off all creditors will take time, as FTX is dealing with a large number of questionable claims. Lawyer Andrew Dietderich explained that some of these claims could conflict with “know your customer” (KYC) rules, which require FTX to confirm the identities of its creditors. While other claims might not be valid at all, making the process of resolving them more complicated and time-consuming.
27 Quintillion Claims!
Intriguingly, FTX is dealing with an overwhelming number of claims, totaling “27 quintillion,” according to Dietderich. A quintillion is 1 followed by 18 zeros—1 billion times bigger than 1 billion. In bankruptcy cases, lawyers typically filter out duplicate, inflated, and false claims after a payout plan is approved by a judge. FTX is facing billions of these flawed claims, Dietderich said.
FTX needs to pay legitimate creditors quickly because the interest it’s earning on the $11.4 billion is lower than the 9% rate creditors are earning while waiting for their payments. FTX filed for bankruptcy in November 2022 after its crypto platform was shut down and handed over to insolvency experts. It got court approval for its payout plan in October.