Bankrupt exchange FTX has recently filed a lawsuit against Kucoin, another cryptocurrency exchange, demanding the return of over $50 million worth of FTX’s crypto assets.
Summary:
Good news! Bybit’s “2.28 billion-dollar settlement agreement with FTX” brings creditor repayment one step closer.
Background:
FTX Repayment Guide: 98% of creditors receive 118% in cash, repayment timeline, and how much funding will return to the market.
Table of Contents:
FTX sues Kucoin
More about FTX’s bankruptcy liquidation process
FTX bankruptcy plan details
FTX’s restructuring team, from the bankrupt cryptocurrency exchange, submitted the final voting results to the United States Bankruptcy Court in Delaware at the beginning of this month during the “Confirmation Hearing.” Judge John Dorsey has approved the plan, and the reimbursement process has made significant progress and may begin as early as the end of this year (pending the court and official announcement of the final timeline).
At the same time, FTX has reached a $228 million settlement agreement with the exchange Bybit, in which FTX agreed to drop the lawsuit against Bybit, and Bybit agreed to pay the settlement amount, meaning it will recover more funds from the platform.
FTX sues Kucoin
On the 28th of this week, FTX submitted documents to the court once again, filing a lawsuit against another cryptocurrency exchange, Kucoin, demanding the recovery of over $50 million in assets seized by Kucoin.
According to FTX’s statement, Kucoin locked FTX’s sister company Alameda Research’s account shortly after FTX initiated the bankruptcy process, preventing the FTX bankruptcy team from accessing it. FTX stated that the value of these assets was about $30 million at the time but has now risen to over $50 million. However, despite multiple requests for communication with Kucoin and its legal representatives, Kucoin has refused to return these assets.
More about FTX’s bankruptcy liquidation process
After declaring bankruptcy in November 2022, FTX began a lengthy process of litigation and bankruptcy liquidation. With the conclusion of SBF, the founder of FTX’s century trial in Q1 of this year, the FTX liquidation team officially submitted the liquidation plan on May 7th and entered the voting stage, which was approved by Judge John Dorsey on June 25th and finally obtained approval this Tuesday.
FTX bankruptcy plan details
In simple terms, the core content of FTX’s bankruptcy plan is to prioritize the repayment of users using the funds already recovered, followed by payment of potential competing claims raised by government regulatory agencies.
However, it is worth noting that, unlike Mt. Gox, another exchange that initiated repayments to users earlier this year, FTX’s compensation details include:
1. Compensation amount
According to FTX’s restructuring plan submitted to the Delaware Bankruptcy Court in May, once all assets are sold, the company estimates that there will be up to $14.5 billion to $16.3 billion in cash available for distribution.
2. Compensation form
Future loss compensation is calculated based on the US dollar price of cryptocurrencies exercised by FTX on November 11, 2022, under Chapter 11 of the Bankruptcy Act, rather than compensating for the loss of cryptocurrencies by creditors. Therefore, unless users’ assets held on FTX are stablecoins, they will still face significant losses. For example, when FTX applied for bankruptcy protection, the price of Bitcoin was only about $16,000, but the current price of Bitcoin is approaching $64,000, which means that if a creditor held one Bitcoin on FTX at that time, they might only receive $16,000, which is only a quarter of the current price.
In response to this, FTX creditor representative Sunil Kavuri has criticized multiple times that creditors will actually receive “10% to 25% of the value of their cryptocurrencies,” which has disappointed and even angered many creditors.
However, the FTX liquidation team explained that when they took over FTX, there was already a significant shortfall in FTX’s account funds, with Bitcoin accounting for only 0.1% of the listed amount and Ethereum only 1.2%. If they were to compensate with physical cryptocurrencies, they would have to spend more money to purchase them from the market, which is almost unrealistic.
3. Compensation standards
Depending on the type of claim by the creditors, the majority of customers (creditors with holdings of $50,000 or less) can receive approximately 118% of the loss compensation, while some creditors may receive 142% of the loss compensation.
At the same time, Galaxy Research Director Alex Thorn recently stated that FTX will not make full payment in one go. Users with creditor amounts below $50,000, accounting for as much as 98%, will receive a total of $1.1 billion in the first round of payments, with the remaining funds to be paid in installments in Q1 and Q2 of next year.
4. Compensation timeline
With the approval of the bankruptcy plan, experts expect that once the plan officially takes effect, FTX will make payments to 98% of its users within 60 days. However, the exact timeline is still subject to official clarification.
According to FTX creditor Mr. Purple’s tweet on September 30th, the effective date of FTX’s bankruptcy plan is expected to be October 31st. If this is true, it means that FTX creditors will have the opportunity to receive compensation before the end of the year.
However, Mr. Purple also pointed out that according to another interpretation in the Claims Market, the specific compensation may be delayed until early 2025 because the proposal for the establishment of a payout reserve fund by the Wind Down Board is not expected to be submitted until November, and it may even be delayed until December. Therefore, it is still uncertain when creditors will be able to start receiving compensation.
5. No hope of FTX exchange restart
In the early stages of FTX’s bankruptcy liquidation, some users speculated that FTX might restart after the bankruptcy reorganization. However, foreign media previously revealed that FTX did not find suitable investors and bidders, making it almost impossible for the company to rebuild.
Although FTX’s platform token FTT is still present in the market, if FTX does not restart in the future, this cryptocurrency may no longer have any practical value and will become worthless.