FTX | Oct 9, 2024
Image: Pixabay/BenjaminNelan
FTX’s $16.5 Billion Repayment Plan Likely to Boost Bitcoin’s Price and Liquidity
FTX announced on October 7, 2024 that the United States Bankruptcy Court in Delaware has agreed to FTX’s repayment plan of disbursing between $14.7 billion and $16.5 billion to creditors.
See: FTX Clients To Be Fully Reimbursed with Interest
While its a watershed moment for many in crypto, the size and volume of this repayment plan may have significant implications for Bitcoin’s price and market liquidity.
John J. Ray III, CEO FTX:
“The Court’s confirmation of our Plan is a significant milestone on our pathway to distributing cash to customers and creditors. Today’s achievement is only possible because of the experience and tireless work of the team of professionals supporting this case, who have recovered billions of dollars by rebuilding FTX’s books from the ground up and from there marshaling assets from around the globe. It also reflects the strong collaboration we have had with governments and agencies from around the world that share our goal of mitigating the wrongdoings of the FTX insiders.”
- Amount Collected – Between $14.7 to 16.5 billion has been collected and will be given back to creditors.
- Repayment – 98% of FTX creditors are expected to get 119% of their allowable claims (includes interest) with the reimbursement to begin within 60 days of the plan’s effective date (yet to be announced).
See: Caroline Ellison Sentenced 2 Years for Role in FTX Fraud
- Liquidity Surge – With billions of dollars potentially reentering crypto markets across more than 200 jurisdictions, this distribution will significantly boost market liquidity. Analysts believe that more than $2.4 billion could enter the market, driving up Bitcoin’s value. Since the collapse of FTX in 2022, Bitcoin’s price has increased from $16,000 to $63,000.
- Tax Concerns – Some creditors are concerned over the tax implications of getting cash payouts rather than in-kind cryptocurrency. The court backed the cash settlement option for practical reasons, with 94% of creditors supporting the payback arrangement.
John J. Ray III, CEO FTX:
“Looking ahead, we are poised to return 100% of bankruptcy claim amounts plus interest for non-governmental creditors through what will be the largest and most complex bankruptcy estate asset distribution in history. The estate is working to finalize arrangements to make distributions to creditors across more than 200 jurisdictions around the world. In preparation for this process, we are finalizing agreements to retain specialized agents to assist us in getting recoveries to customers around the world as safely and expeditiously as possible. I want to thank all customers and creditors of FTX for their patience throughout this process.”
See: CSA Extends Deadline for Crypto Platforms’ VRCA Compliance
Outlook
While the implications of the repayment plan are not guaranteed, the ramifications for Bitcoin are quite clear. That is, more liquidity will likely result in higher prices.
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