FTX names BitGo and Kraken as distribution partners for bankruptcy payouts

Bankrupt crypto exchange FTX has picked crypto custodian BitGo and once-rival exchange Kraken as distribution partners for its bankruptcy payouts. The failed exchange confirmed this in an announcement today while also updating its claims portal.

According to the information on the claim portal, creditors can also receive their bankruptcy payouts in stablecoins. This will be possible for creditors by converting their fiat for digital assets, including stablecoins.

Meanwhile, both BitGo and Kraken have confirmed their partnership. In its announcement, BitGo noted that FTX retail users could reclaim their funds securely via its platform. The firm’s CEO, Mike Belshe, noted that it is proud to support FTX.

He said:

“With our long-standing reputation as the most secure choice in the industry, we work hard to bring institutional-grade service to both retail and institutional clients, ensuring users the peace of mind they need to manage and grow their assets safely.”

As for Kraken, it confirmed the agreement in a blog post, stating it will assist the FTX and its affiliated debtors with distributing their recoveries in supported jurisdictions. The exchange noted that this is not its first rodeo, as it was also involved in the Mt Gox distributions in 2024.

While FTX has already chosen two firms to distribute payouts to customers, the Claims Portal shows that the bankrupt exchange intends to select a third. The space for the third distribution partner currently says “Upcoming Distribution Agent. More information to come soon.”

The choice of the two distribution partners is already raising concerns in some quarters. Users in jurisdictions where BitGo and Kraken do not operate are worried about how they will be able to process their claims and get their repayments.

FTX picks January 3, 2025, as effective date

The announcement of distribution partners marks another major step in repaying the exchange’s creditors. With that decision, FTX has also picked January 3, 2025, as the effective date for its Chapter 11 Reorganization plan. This means that FTX will have to make the initial distributions to its customers within 60 days of that date.

Based on the plan approved by the US Bankruptcy Court for the District of Delaware in October, 98% of the FTXE creditors in the convenience class and fall within the convenience class will get their initial distribution within this period.

Creditors in this category are scheduled to receive 119% of their allowed claims based on the value of the customers’ crypto holdings as of November 2022, when the exchange filed for bankruptcy. All they need to do is meet the distribution requirements.

FTX CEO John Ray III described the whole process up to this point as a reflection of the bankruptcy estate’s outstanding work and its efforts to recover assets.

He said:

“We are well positioned to begin executing the distribution of recoveries back to all customers and creditors and encourage customers to complete the necessary steps to begin receiving distributions in a timely manner.”

Meanwhile, creditors in other classes of claims might still have to wait much longer before they can start receiving their repayments. FTX noted that it will announce payment dates for them soon.

FTX recovers $35 million from Gate.io

While the bankruptcy estate is working on commencing distribution, recovery efforts remain underway, and some are already yielding. After filing an adversary lawsuit against the Gate.io exchange in November to recover $40 million, on-chain transactions show that around $35 million has been returned to the FTX-controlled wallet.

This marks another recovery after the exchange received around $14 million from several political action committees and campaign groups a few days ago. However, it remains locked in a dispute over claims with some creditors, such as Three Arrows Capital and Crypto.com.

The professionals involved in the bankruptcy proceedings have also been criticized for the amount of money spent on the reorganization plan. Between May and July 2024, the bankruptcy professional fees were $98.5 million, with the financial advisor Alvarez & Marsal and legal counsel Sullivan & Cromwell being the top earners within that period.

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