In another step toward closure, bankrupt cryptocurrency exchange FTX will begin repaying creditors on May 30, with $5 billion set to be distributed among thousands of claimants.
This is again a milestone in what has been one of the most high-profile financial collapses in crypto history.
From Crypto Darling to Spectacular Collapse
FTX, once considered a rising star in the digital asset industry, imploded in November 2022 amid allegations of fraud, poor financial oversight, and gross mismanagement. Founded by Sam Bankman-Fried (SBF), FTX had aggressively marketed itself as a safe and innovative crypto platform, sponsoring sports arenas, political campaigns, and celebrity endorsements. At its peak, the company was valued at over $32 billion.
However, beneath the surface, FTX was a house of cards. Customer funds were improperly diverted to support Alameda Research, a trading firm also founded by SBF. The company lacked basic accounting practices, and when customer confidence faltered, a wave of withdrawal requests triggered a liquidity crisis. FTX halted withdrawals and filed for bankruptcy shortly thereafter.
How the Bankruptcy Estate Recovered Billions
Under the guidance of bankruptcy trustee John J. Ray III, who also led the post-Enron recovery, the FTX estate has worked diligently to recover funds. This has included:
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Liquidating real estate holdings in the Bahamas and elsewhere.
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Selling venture investments, including a highly profitable stake in AI startup Anthropic, a competitor to OpenAI.
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Benefiting from the recovery of crypto markets. When FTX collapsed, Bitcoin was trading around $15,500 and Solana near $10. Both assets have since appreciated significantly, helping boost the value of the remaining holdings.
These factors have enabled the estate to amass sufficient capital to repay most customers in full, at least in terms of USD value as of November 2022.
The Catch: Valuation Date Limits Payouts
While the news is largely positive, there’s a crucial caveat: repayments are based on the market value of assets at the time of bankruptcy, not current prices. For example, a user who held 1 BTC on FTX will receive around $15,500—the value in November 2022—rather than today’s market price of over $100,000 (depending on exact timing).
This has frustrated many creditors, especially those who had significant crypto balances on the platform, but the structure reflects standard bankruptcy procedure, where liabilities are typically calculated based on the value at the time of insolvency.
Four Creditor Groups to Be Paid First
According to official filings, four creditor categories will begin receiving payments starting May 30. The distributions will be handled by Kraken and BitGo, two well-known crypto custodians, with transactions expected to be completed within three business days.
This new wave of repayments comes at a bullish moment for the crypto sector. Under a crypto-friendly administration led by Donald Trump, markets are regaining momentum. As such, there’s significant speculation around whether recipients of these repayments will reinvest their recovered funds back into crypto assets, potentially providing additional market tailwinds.
Looking Ahead
The FTX case has become a landmark moment in crypto history—one that revealed serious vulnerabilities in centralized platforms, while also showcasing the potential resilience of the industry. The fact that the estate is able to repay creditors, despite the scale of the collapse, is in part due to a sharp market recovery and astute asset management during the bankruptcy proceedings.
Still, the saga serves as a cautionary tale: trust in crypto platforms must be earned through transparency, accountability, and regulatory oversight. If you own a lot of crypto, you better use your own hardware wallet.
As the dust settles, investors and regulators alike will be watching closely to see how—and where—these billions of dollars will flow next.
