FTX’s bankruptcy estate will begin distributing over $5 billion to thousands of creditors starting May 30, marking a significant moment in one of crypto’s most high-profile collapses. According to the FTX Recovery Trust, payouts will be processed over a multi-day window and are structured to cover a wide spectrum of claimants, ranging from retail customers to institutional counterparties.
The plan - approved by the bankruptcy court - divides creditors into four classes, with recovery percentages ranging from 54% to 120%, depending on the nature of their claims. Distributions are based on the U.S. dollar value of assets held on the platform as of FTX’s failure in November 2022. This means the calculation ignores the recent surge in crypto prices, particularly Bitcoin and Ethereum, whose value has more than doubled since the bankruptcy.
The estate’s current plan prioritizes transparency and broad restitution across different claimant types. Here’s how the distribution is structured:
Class 5 Creditors: Comprising trading firms, institutional lenders, and Alameda Research counterparties. Recoveries will range from 54% to 72%, depending on the complexity and verification of the claims.
Retail and Small Unsecured Creditors: Expected to recover approximately 61% of their USD-equivalent holdings at the time of the collapse. This group includes everyday users who had crypto or fiat funds frozen on the exchange.
Intercompany Claims: Creditors that are other FTX entities or subsidiaries are set to receive 120% of approved claims, reflecting internal debt repayments and legal obligations among affiliated corporate structures.
General Unsecured Claims: These fall across a broader spectrum, with recovery estimates likely in the 60–70% range depending on classification and legal challenges.
The repayment process will be facilitated by custodians BitGo and Kraken, who are tasked with transferring funds within one to three business days of the May 30 start date. Over 90% of claims have already been verified and approved for this initial round of distribution.
Crypto Market Context: Recovery and Regulation
The timing of the payout comes amid broader shifts in the crypto industry. In the 18 months since FTX’s implosion, the market has experienced a slow but steady rebound, fueled in part by the approval of U.S. spot Bitcoin and Ethereum ETFs, growing institutional participation, and a regulatory climate that—at least temporarily—appears to be warming under the current U.S. administration.
As Bitcoin trades near $100,000 and Ethereum approaches $3,500, many FTX users find themselves grappling with a frustrating reality: their claims are being valued at November 2022 prices, which reflected Bitcoin at roughly $16,000. That means while fiat holders are receiving near-full or even overcompensated payouts, crypto holders will not benefit from any of the asset appreciation that occurred post-bankruptcy.
This discrepancy has reignited debate around how bankruptcy courts treat crypto assets—raising questions about fairness, valuation timing, and the legal status of digital assets in insolvency proceedings.
From Collapse to Distribution: A Timeline of FTX’s Fall
FTX, once a $32 billion exchange and the second-largest crypto trading platform globally, filed for bankruptcy on November 11, 2022. The implosion followed a liquidity crisis triggered by revelations of misuse of customer funds by sister company Alameda Research. Within days, FTX had halted withdrawals, filed Chapter 11, and its founder Sam Bankman-Fried (SBF) resigned as CEO.
The court appointed John J. Ray III, known for his work on the Enron liquidation, as CEO of the bankrupt entity. Ray’s team spent over a year tracing assets, identifying creditors, and negotiating asset sales - including large holdings in Solana, venture capital investments, and real estate.
The estate’s total recoverable value is estimated to exceed $14 billion, allowing for the current $5 billion payout and additional future distributions.
Discontent Among Crypto-Native Creditors
While the scale of recovery is notable - many bankruptcies yield pennies on the dollar - it has not come without criticism. Particularly vocal are crypto-native users, many of whom held digital assets rather than fiat on the platform. These users argue that the estate’s use of historical prices unfairly penalizes crypto holders who have missed out on the recent bull run.
An Ethereum holder with 10 ETH in November 2022 would be compensated for roughly $12,000, even though those same tokens are now worth more than $35,000.
Critics argue that if the estate holds the actual crypto assets and sells them during the bull market, they should at least share in the upside. However, bankruptcy law does not currently recognize that logic, instead treating claims as fiat-denominated debts locked to the value at the time of filing.
This has prompted calls for updated legal frameworks that reflect the nature of digital assets, especially in bankruptcy and insolvency proceedings.
Alameda’s Shadow: Class 5 and the Intercompany Tangle
The largest and most contentious portion of the creditor pool belongs to Alameda Research and related institutional lenders. These counterparties were often engaged in leveraged trading, margin arrangements, and complex collateralized structures—many of which lacked proper documentation or were exposed to undisclosed risks.
The recovery rates for these claims (54–72%) reflect the challenge of verifying balances and navigating internal FTX-Alameda liabilities. A subset of Class 5 creditors has threatened legal action to challenge the repayment percentages, alleging that their claims were unfairly subordinated in favor of smaller creditors.
FTX’s legal team has pushed back, arguing that repayment structures are consistent with both U.S. bankruptcy law and equitable distribution principles. However, litigation risks still linger as certain creditors seek priority status or reclassification.
Institutional Custody and the Role of Kraken, BitGo
The selection of BitGo and Kraken as distribution agents was strategic. Both firms have existing infrastructure for digital asset custody, KYC verification, and fiat settlement, allowing for a smoother disbursement process. However, the task is far from simple.
With thousands of claimants across jurisdictions, multiple currencies, and differing KYC statuses, the two platforms must coordinate closely with the bankruptcy estate to ensure accuracy and compliance. Users who fail to meet identity verification requirements or whose claims are flagged for review may see delays.
This payout model also serves as a test case for future bankruptcy resolutions involving digital assets - a precedent that legal, regulatory, and financial observers are watching closely.
What Comes Next?
The May 30 distribution is only the first phase of FTX’s multi-stage restitution plan. Additional payouts will follow, based on asset liquidations, legal recoveries, and ongoing claims reconciliation. Some funds remain tied up in litigation or dispute, including clawbacks and creditor challenges.
Meanwhile, Sam Bankman-Fried remains in federal custody following his conviction on fraud and conspiracy charges in late 2023. Sentencing is scheduled for later this year, with restitution orders potentially impacting his remaining personal holdings and investments.
As the bankruptcy estate winds down, questions remain:
- Will crypto bankruptcy frameworks evolve to reflect asset volatility?
- How will custodial firms handle data protection and compliance in mass payout scenarios?
- Can U.S. regulators develop guidance that accounts for both crypto’s technical uniqueness and its legal limitations?
For now, FTX’s estate moves forward with a rare outcome in the world of crypto collapses: a sizable, multi-billion-dollar payout to victims - albeit one that still leaves open questions about justice, timing, and trust.