Bankrupt Cryptocurrency Exchange FTX Announces Chapter 11 Reorganization Plan Will Become Effective on January 3

The reorganization plan, approved by the court earlier this year, aims to return funds to customers and creditors affected by the exchange's collapse in 2022.

Bankrupt cryptocurrency exchange FTX has announced that its Chapter 11 reorganization plan will become effective on January 3. From this date, the process of distributing funds to the company’s creditors and customers will commence.

The reorganization plan, approved by the court earlier this year, aims to return funds to customers and creditors affected by the exchange’s collapse in 2022. The total amount available for distribution is estimated between $14.7 billion and $16.5 billion.

FTX filed for bankruptcy in November 2022 after a liquidity crisis triggered by the collapse of its native token, FTT. The exchange owed an estimated $8 billion to its top 50 creditors at the time of the filing.

As part of the reorganization plan, creditors with claims under $50,000 will be paid in full, while larger creditors will receive a pro rata share of the available funds. The plan also includes provisions for the distribution of equity in the reorganized company to creditors and customers.

FTX is collaborating with cryptocurrency exchange Kraken and custodial firm BitGo to ensure secure and efficient fund distribution. According to the exchange's latest announcement, the effective date for the Chapter 11 reorganization plan is January 3, 2025.

FTX aims to commence the distribution of funds to creditors and customers within 60 days of the effective date. Creditors with claims under $50,000 will be prioritized in the initial round of payments.

Refer to the official tweet by FTT:

FTT InfoFTX is a centralized cryptocurrency derivatives exchange. It was designed to address inefficiencies in existing futures trading platforms, offering advanced trading features like clawback prevention, centralized collateral management, and universal stablecoin settlement. Backed by major industry players like Alameda Research, BlackRock, and Coinbase Ventures, FTX quickly gained traction, with daily trading volumes reaching billions of dollars and over a million registered users as of 2022.

FTX aims to optimize the derivatives trading experience through several innovations. Its clawback prevention mechanism minimizes the socialization of losses using a three-tiered liquidation model. Unlike other exchanges where collateral is fragmented across wallets, FTX employs a universal margin wallet backed by stablecoins, simplifying position management and reducing liquidation risks. The platform also introduced leveraged tokens, ERC-20 assets that allow traders to take leveraged positions (e.g., 3x short or long) without margin trading. These tokens are compatible with other spot exchanges, adding to their utility and liquidity.

The FTX Token (FTT) is the platform’s native utility token. FTT provides various benefits, including transaction fee discounts, staking rewards, and collateral for margin trading. The token follows a buyback-and-burn model, using portions of trading fees, reserve fund profits, and other commissions to maintain its value. FTT also powers several features, such as leveraged token creation, fee payments for OTC and futures market services, and staking benefits like bonus votes, IEO ticket access, and airdrop participation.