FTX is about to pay out $16 billion. Will the "ammunition depot" for the second half of the bull market be opened soon?

1. Introduction

The collapse of FTX, the fastest-growing CEX unicorn in the history of cryptocurrencies, with a daily peak trading volume of over $6.6 billion and a total token market value of $26 billion, has accelerated the end of the previous bull market. As FTX begins to compensate investors, the "ammunition depot" for the second half of the bull market is about to open.

According to an official email, FTX liquidator PwC released an update on the liquidation process, in which customers of FTX or FTX International have the right to file claims in the Bahamas procedure or the U.S. procedure. At this stage, if the bankruptcy protection plan is approved, customers can expect to receive 119 to 143 cents per dollar in claims.

For clients who have submitted proof of debt claims in the Bahamas process, FTX will write in the future to confirm whether the client wishes to continue to administer, process, adjudicate, and settle the claim in the Bahamas. Clients who have not yet submitted a proof of debt claim in the Bahamas process may submit their claim before the deadline, which is currently expected to be mid-August 2024.

Public information shows that FTX plans to distribute more than $16 billion to its creditors. The key dates are as follows:

1. August 16: FTX customer voting deadline;

2. October 7: Judge Dorsey makes a decision on plan approval.

After the court's approval, FTX will repay creditors within two months, and the specific implementation period is from the fourth quarter of 2024 to the first quarter of 2025. The repayment event, together with interest rate cuts and the US election, will bring more positive factors to the crypto market at the end of the year. Given that most FTX customers are cryptocurrency enthusiasts, a huge amount of $16 billion will enter the cryptocurrency market and become a catalyst for price increases.

2. The key time points for compensation are as follows. Investors can keep an eye on them.

PS: There are some uncontrollable factors in the compensation process, such as creditors’ doubts about the compensation plan. The main point of contention is whether to pay in fiat currency or in tokens.

1. Email sending deadline: July 10 (has passed)

The last date by which the debtor sends voting packets and related documents to creditors, ensuring that all interested parties receive the necessary information within the stipulated time so that they can vote on the plan or raise objections;

2. Deadline for filing Rule 3018 motions: July 16

If a creditor requests a temporary permission or change in their voting rights, a motion must be filed by this date. Resolving disputes before the formal vote ensures the fairness and accuracy of the vote.

3. Deadline for submission of supplementary documents: August 9

4. Confirm the deadline for submitting objections: August 16

5. Voting deadline: August 16 at 4:00 p.m. (EST)

All ballots must be properly executed, completed, and received by this date;

6. Voting report deadline: 7 days before the confirmation hearing

7. Deadline for replying to confirmation objections: 7 days before the confirmation hearing

8. Proposed date for confirmation hearing: October 7 at 10:00 a.m. (EST) [tentative]

the date of the hearing at which the court will consider confirming the reorganization plan;

3. As mentioned above, the buying power of the US$16 billion remains uncertain because some creditors are dissatisfied with the compensation plan.

Lawyers overseeing the FTX bankruptcy case recently submitted a reorganization plan that will fully compensate almost all customers and provide an additional 18% interest. If the majority of creditors and the bankruptcy judge agree to the plan, the compensation will be paid within two months. However, creditors still expressed dissatisfaction and concerns about the following aspects:

Creditors unhappy with restructuring plan

Some creditors were unhappy with the restructuring plan because they could not get their original crypto back from the exchange. Instead, they will be compensated in U.S. dollars based on the value of the crypto they held when FTX filed for bankruptcy in November 2022. Many believe this is a missed opportunity to profit as crypto prices have since risen.

Creditors accuse FTX of selling assets at low prices

The creditors also accused FTX of selling some assets at low prices before bankruptcy, such as the crypto derivatives platform LedgerX and a large number of SOL tokens. They believed that these transactions harmed the interests of creditors and requested an investigation into the relevant personnel.

Creditors question FTX 2.0 plans

Some creditors believe that if FTX decided to restart its trading platform, it could have received hundreds of millions of dollars in additional value. However, FTX said they have explored the possibility of restarting but have not found any buyers willing to invest.

Creditors concerned about unpursued claims

Creditors are also concerned that FTX may not be pursuing all due claims, such as against Binance. FTX said they are still investigating and filing lawsuits, but have not made a final decision on matters related to Binance.

Restructuring plan faces opposition

In addition to the above issues, some creditors have also raised objections to certain terms of the restructuring plan, such as the distribution method and governance structure. They believe that the plan is too favorable to FTX's management team and lacks supervision over creditors.

IV. Summary

It has been two years since FTX collapsed. Although investors will receive compensation of nearly 1.18 times the nominal value, they have also paid a huge cost in time and energy. While creditors are asserting their rights, they must also realize that since most assets have been liquidated, the U-based assets held by FTX have lost the potential to achieve high returns in a bull market.

Back to this article, if the current compensation plan is followed, nearly US$16 billion will be injected into the crypto market at the beginning of the fourth quarter, which will inevitably increase market liquidity and enhance investor confidence.