FTX Customers Outraged Over Reimbursement Plan, Set to Receive Only 10-25% Back

FTX creditors are set to recover only a fraction of their cryptocurrency holdings, with estimates ranging from 10% to 25%, according to recent bankruptcy documents.

This news has sparked widespread frustration among creditors, who argue that the repayment plan does not adequately compensate for their losses, especially given the dramatic increase in cryptocurrency prices since FTX’s collapse.

The repayments will be based on the value of cryptocurrencies at the time FTX filed for bankruptcy, when Bitcoin (BTC) was trading around $16,000. Currently, Bitcoin’s value hovers near $65,000, leaving creditors with significantly less than what they believe they are owed.

This discrepancy has led to emotional and financial strain for many, with reports of mental distress and even personal turmoil among those affected.

Sunil Kavuri, an FTX creditor, has been vocal about his dissatisfaction, stating that the compensation plan is deeply flawed. He explained that many FTX customers have lost their life savings, and the proposed repayment terms fail to address the full extent of their financial losses.

Further complicating the situation is the reorganization plan being contested by various parties. A U.S. trustee overseeing the bankruptcy has raised concerns about the legal protections granted to FTX administrators, calling them excessive compared to similar cases. The U.S. Securities and Exchange Commission (SEC) has also hinted at potential objections, particularly if stablecoins are used for repayments, which could further disadvantage creditors.

FTX’s former CEO, Sam Bankman-Fried, and his entity, Emergent Technologies, have recently agreed to liquidate $600 million worth of Robinhood shares to help repay creditors. However, many creditors feel that these efforts fall short of delivering justice, with some expressing concerns that the reorganization plan favors the estate’s representatives over those who lost money.

Also, it is worth noting that Caroline Ellison received a 24-month prison sentence for her role in the FTX collapse, despite helping prosecutors convict her former boss and ex-boyfriend, Sam Bankman-Fried.

At her sentencing on Tuesday, U.S. District Judge Lewis Kaplan recognized Ellison’s “remarkable” cooperation and commended her testimony during the fraud trial. However, he stressed that her assistance did not warrant a “get out of jail free card,” citing the case as one of the most significant financial frauds in history.

As FTX prepares to distribute $16 billion to its creditors, many await the impact on the broader cryptocurrency market.

While some analysts predict that this redistribution could lead to increased liquidity, others believe it will do little to ease the financial pain endured by those affected by FTX’s collapse.