In a significant move to recover funds for creditors impacted by its 2022 collapse, the defunct crypto exchange FTX has inked a deal with UAE-based platform Bybit. This agreement, worth $228 million, enables FTX to withdraw digital assets as part of a legal settlement. Under this arrangement, FTX aims to recover approximately $175 million in assets held on Bybit and $53 million from the sale of BIT tokens to Bybit’s investment arm, Mirana Corp. The court approval for this settlement is currently pending in the U.S. Bankruptcy Court for the District of Delaware.
Aiming For Significant Asset Recovery
According to FTX’s filing, the agreement offers the opportunity to recover nearly everything it had sought in its dispute with Bybit. FTX alleged that Mirana had made substantial withdrawals from the platform, amounting to $327 million, just before the exchange declared bankruptcy—leaving other users unable to access their own funds. The settlement includes provisions allowing defendants who withdrew funds just before the collapse to retain creditor claims of up to 75% of their account balances at the time of bankruptcy, a strategy that FTX described as bringing “significant net savings for the debtors’ estates.”
John J. Ray III, who assumed the role of FTX CEO following the platform’s collapse, spearheaded the agreement as part of ongoing efforts to optimize returns to creditors. In a statement, FTX emphasized that the settlement offers a strong recovery for stakeholders while avoiding the costs and uncertainties tied to prolonged litigation and enforcement abroad. This agreement with Bybit is just one of the initiatives under Ray’s leadership to maximize the estate’s recovery potential. Earlier this month, FTX’s wind-down plan to distribute at least $12.6 billion was approved, setting the stage for repayments to long-waiting creditors.
Creditor Repayments Likely by 2025
In a court-approved reorganization plan, FTX is expected to begin creditor repayments nearly two years after the exchange’s downfall. Judge John Dorsey has greenlighted the plan, aiming to begin payouts in late Q4 2024 or early Q1 2025. Financial analysts Vetle Lunde and David Zimmerman from K33 Research anticipate that repayments will follow within a 60-day window after the court’s effective date, which is likely to be announced in mid-November.
With these repayments expected to inject liquidity back into the market, some analysts speculate that Bitcoin prices may experience a boost. However, a substantial portion of FTX’s claims—estimated between $14.4 billion and $16.3 billion—has already been acquired by credit funds, reducing the likelihood of these funds re-entering the market. Additionally, approximately 33% of the remaining claims involve sanctioned individuals or entities without adequate KYC documentation, making it improbable that these assets will be recovered.
Also Read: FTX Seeks Settlement With Caroline Ellison – Potential Recovery Of Up To 142% For Creditors
Given these conditions, experts project that around 20% to 40% of the remaining $8 billion in claims could return to circulation. This assumption rests on FTX’s customer base, which consists largely of “aggressive, crypto-native risk-takers.” Currently, FTX’s native token, FTT, stands at $1.80, signaling investors’ cautious outlook amidst this recovery process.
Will FTX’s Recovery Impact the Broader Crypto Market?
As FTX advances in its asset recovery process, the anticipated creditor repayments could influence market dynamics, potentially contributing to positive momentum in major cryptocurrencies. However, with significant claims already offloaded to credit funds and some assets likely unrecoverable, the broader market impact may be limited. Still, the FTX-Bybit settlement stands as a notable step in FTX’s complex journey to bring relief to affected stakeholders and serves as a critical test of post-collapse recovery in the crypto world.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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