Here’s why FTX repayment won’t happen tomorrow

Despite social media rumours suggesting an FTX reimbursement by September 30, customers will have to wait an additional week for any updates on repayments. Before FTX can disburse any creditor funds, the court will have to approve its wind-down plan, with the next court hearing scheduled for October 7.

FTX is waiting on court approval for its reorganization plan

When FTX filed for bankruptcy protection in November 2022, and CEO Sam Bankman Fried resigned, John Ray III, a long-time bankruptcy litigator, took over the reins to try and fix the mess. 

On May 7, 2024, the exchange filed its Chapter 11 Plan of Reorganization and a disclosure statement, revealing that it owed about $11.2 billion to its customers. The company estimated it could distribute between $14.5 billion and $16.3 billion to pay its creditors and customers. The plan also included details on supplementary interest payments that could be made once all claims are paid in full.

At the time, John Ray commented:

We are pleased to be in a position to propose a Chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors.

~John Ray

Unfortunately, social media commentaries led creditors to believe that the exchange might be able to repay their funds as early as September 30. However, the court has yet to approve FTX’s restructuring plan, meaning FTX cannot begin its repayment rollout until then.

The next court hearing is set for October 7, and Judge John T. Dorsey will preside. Creditors will have to wait till then to get some clarity on their repayments. If the court approves the plan, creditors with smaller claims under $50,000 may receive their paybacks before the year’s end.

Some analysts predict a bullish market outlook for when FTX makes repayments

Crypto analyst Miles Deutscher believes that with FTX paying over $16 billion to its creditors, recipients could re-enter the market, making new bids and thus infuse the money back into the crypto market, fueling crypto market activity.

Marty Party, a crypto researcher and analyst, also thinks that the $16 billion payout could end up back into the crypto market as reinvestments, providing more liquidity for crypto’s ecosystem.

Markus Thielen, founder of 10x research, maintains that FTX disbursements could contribute to a positive crypto market outlook. He remarked that there could be a melt-up in risk assets since the Federal Reserve seemed to have raised the S&P 500 level at which they would step in to protect investors. This, he explained, suggested potential for additional rate cuts, commonly known as the “Fed put.” Consequently, he believed many investors would likely adjust their portfolios in preparation for 2025.