In an ongoing pursuit to recover assets and repay creditors impacted by its 2022 demise, the defunct cryptocurrency exchange FTX, previously led by Sam Bankman-Fried, has made significant progress. A recent accord with UAE-based crypto platform Bybit marks a pivotal moment in this effort. Through this agreement, FTX is set to reclaim assets as part of a comprehensive $228 million settlement.
FTX’s Agreement with Bybit for Asset Recovery
According to Bloomberg, the settlement entails FTX withdrawing its litigation against Bybit Fintech Ltd. and associated entities. To seal this agreement, FTX has sought approval from the US Bankruptcy Court for the District of Delaware, following months of intricate negotiations.
Under the terms of this arrangement, FTX is poised to recover roughly $175 million in digital assets currently held on Bybit. Additionally, it plans to sell BIT tokens to Bybit’s investment division, Mirana Corp., for an estimated $53 million.
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The Roots of the Legal Dispute
The legal clash originated from accusations that Mirana had withdrawn $327 million in assets from FTX just before the exchange’s downfall. These withdrawals were allegedly facilitated through “special privileges,” which left other users grappling to access their funds. As part of the settlement, those who withdrew funds shortly before FTX’s bankruptcy filing will be granted creditor claims equivalent to 75% of their account balances at that time.
FTX has characterized this settlement as yielding “significant net savings for the debtors’ estates,” expressing confidence in the agreement. In their filing, they stated, “Through the Settlement Agreement, the Debtors will be recovering substantially everything that they seek to recover.”
Implications for Stakeholders
The company underscored that this settlement would ensure a substantial recovery for stakeholders, all while circumventing the “costs and uncertainties” associated with prolonged litigation and potential enforcement challenges abroad. This settlement is a key part of the strategic initiatives led by FTX’s new CEO, John J. Ray III, who assumed leadership following the exchange’s collapse. Earlier this month, the court sanctioned FTX’s plan to wind down operations and allocate at least $12.6 billion to customers whose assets have been ensnared on the platform.
Anticipated Creditor Payouts by Early 2025
As previously documented by Bitcoinist, Judge John Dorsey from the US Bankruptcy Court has given the green light to a reorganization plan designed to initiate creditor repayments nearly two years post-FTX’s collapse.
K33 analysts Vetle Lunde and David Zimmerman have forecasted that creditor payouts might commence in the later part of Q4 2024 and extend into early Q1 2025. These payouts are anticipated to take place within a 60-day timeframe from the court’s effective date, expected to be disclosed in mid-November.
Potential Market Impact
Analysts suggest that the release of funds could positively influence Bitcoin (BTC) prices as these assets re-enter the market. However, a considerable portion of the claims, estimated between $14.4 billion and $16.3 billion, has already been acquired by credit funds, diminishing the likelihood of these assets flooding the market.
Furthermore, approximately 33% of the remaining claims are linked to sanctioned entities and individuals lacking proper know-your-customer (KYC) verification, rendering those assets unlikely to be reclaimed. Taking these factors into account, analysts estimate that around 20% to 40% of the remaining $8 billion could potentially re-enter the market. This prediction is based on the nature of FTX’s trader base, predominantly composed of “aggressive, crypto-native risk-takers.”
At present, FTX’s native token, FTT, is trading at $1.80. The developments surrounding FTX’s recovery and settlement strategies are closely watched by stakeholders and the broader crypto community alike, with significant implications for the market’s future dynamics.
