FTX’s Partnerships with BitGo and Kraken: The Crypto Payout Saga

FTX is at it again, folks! This time, they’re teaming up with BitGo and Kraken to handle those pesky bankruptcy payouts. As the crypto exchange navigates through Chapter 11 Reorganization, creditors are understandably curious about what this all means for their hard-earned money. So, let’s break it down, shall we?

FTX’s Bankruptcy and Distribution Partners

Here’s the scoop: FTX has chosen BitGo and Kraken as its distribution partners for those sought-after bankruptcy payouts. This is a big deal as they try to repay creditors after their collapse. They made the announcement on their updated claims portal, where creditors can even opt to get paid in stablecoins by converting fiat currency to digital assets. Pretty wild, huh?

BitGo and Kraken’s Roles in the Crypto Payouts

Now, BitGo and Kraken have confirmed their roles in helping FTX distribute recoveries. BitGo, the crypto custody service we know and love, will allow FTX retail users to reclaim their funds securely. Mike Belshe, BitGo’s CEO, is all in on providing top-notch service to both retail and institutional clients, ensuring their assets are managed and grown securely.

On the other hand, Kraken, a well-known crypto exchange, will be assisting FTX and its affiliates in distributing recoveries to supported jurisdictions. Fun fact: this isn’t Kraken’s first rodeo; they previously helped with the Mt Gox distributions in 2024. The goal is to make this distribution process as smooth as possible.

Concerns for Unsupported Regions

But, here’s the catch. There are concerns about how accessible these payouts will be for creditors in unsupported regions. Kraken, being a US-based exchange, will handle payouts in the U.S. and other supported regions. BitGo will also help distribute recoveries within those same jurisdictions. This means that if you’re in a region that isn’t supported, you might be in for a bit of a struggle to process your claims and receive your repayments.

To be eligible for payouts, creditors need to complete a few steps, including know-your-customer (KYC) validations and onboarding with the distribution partners. This might be a tougher task for those in unsupported regions, considering potential regulatory or logistical barriers.

Effective Date and Reorganization Plan

FTX has set January 3, 2025, as the effective date for its Chapter 11 Reorganization plan. Initial distributions to creditors must be made within 60 days of this date. According to the plan approved by the US Bankruptcy Court for the District of Delaware, 98% of FTX’s creditors in the convenience class will receive their initial distribution within this time frame. They’ll get 119% of their allowed claims based on the value of their crypto holdings as of November 2022, when FTX filed for bankruptcy.

FTX CEO, John Ray III, said this process reflects the bankruptcy estate’s hard work to recover assets. He encouraged customers to complete the necessary steps to start receiving distributions on time. However, those in other classes of claims may have to wait longer for their repayments.

Recovery Efforts and Legal Disputes

While the bankruptcy estate is working on starting the distribution, recovery efforts are ongoing and have already yielded some results. FTX recently snagged $35 million from Gate.io after filing an adversary lawsuit to recover $40 million. That’s another recovery, alongside the $14 million they got from political action committees and campaign groups.

But, wait! There’s more! FTX is still entangled in disputes over claims with some creditors, like Three Arrows Capital and Crypto.com. The bankruptcy professionals involved in these proceedings have also faced criticism for how much money they’ve racked up in fees. Between May and July 2024, bankruptcy professional fees hit $98.5 million, with Alvarez & Marsal and Sullivan & Cromwell cashing in the most.

Summary

There you have it. FTX’s partnership with BitGo and Kraken is a big step in their quest to repay creditors and navigate bankruptcy. While they hope for a smooth distribution process, there are still challenges for creditors in unsupported regions. The effective date for the Chapter 11 Reorganization plan and ongoing recovery efforts show just how complicated managing a large-scale bankruptcy can be.