After its watershed collapse, failed crypto exchange FTX is set to send roughly $1.2 billion in repayments to its first group of creditors.
FTX Digital Markets, the Bahamian unit of the firm, will begin disbursing initial repayments to users owed less than $50,000. These “Convenience Class” creditors are expected to receive 100% of their claim amount, plus 9% interest per year.
The repayments are based on the value of the creditors’ holdings as of the day the cryptocurrency exchange declared bankruptcy, almost three years ago. The $9 billion collapse of FTX followed a series of misrepresentations and mismanagement by the company’s leadership, marking a significant blow to the crypto and digital assets industry.
Life-Shattering Impacts
Though the FTX bankruptcy caused widespread ramifications across the industry, it had life-altering effects on many creditors.
“Our life savings were stolen overnight,” Sunil Kavuri, an FTX creditor, told Cointelegraph. “We had earmarked (funds) for buying homes, children’s education. Many were depressed, suicidal, and had panic attacks…I heard of at least three suicides. Many FTX creditors are left in large debt, taking out loans to cover living costs.”
The FTX collapse was one of the key catalysts behind the subsequent “crypto winter,” during which bitcoin plummeted to around $16,000. The highly publicized bankruptcy was also considered an impetus behind a series of enforcement actions that the U.S. Securities and Exchange Commission imposed on crypto exchanges in recent years.
Strengthening Sentiment
The crypto industry has bounced back, and it had a banner year last year on the strength of new crypto ETFs, more institutional backing, and tech innovations. While sentiment around the crypto industry is stronger, there are still lingering concerns about the volatility and security of exchanges that are not fully regulated in the U.S.
The FTX repayments are a step towards allaying these concerns, but there has been criticism of the payment model. One of the main points of contention is that crypto prices have skyrocketed in the past year, bitcoin has reached an all-time high, and these gains aren’t accounted for in the repayments.
Still, there are some experts who believe that FTX creditors may be confident enough to reinvest some of their repaid funds back into the crypto market.
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