BitGo and Kraken begin distributing $5 billion in former FTX user payouts

Former FTX users are reporting receiving payouts from the bankrupt exchange. On Friday, the exchange announced it has commenced the second round of distributions, valued at some $5 billion, to creditors as part of a previously announced bankruptcy plan.

"Customers should expect to receive funds within 1 to 3 business days from today," FTX wrote on its official X account. "FTX also reminds customers to please remain aware of phishing emails that may look like they are from FTX and scam sites from channels that may appear to look like the FTX Customer Portal."

Crypto custodian BitGo and exchange Kraken were previously named "distribution" partners, as part of the plan.

FTX Trading Ltd., the parent company of the bankrupt crypto exchange, previously announced it would begin distributing more than $5 billion to creditors beginning on May 30 as part of the second phase of its Chapter 11 reorganization plan.

The repayment plan has been criticized by some and lauded by others. Due to the sizable returns on some of the FTX estate’s holdings — notably stakes in firms like AI studio Anthropic and brokerage Robinhood as well as massive stockpiles of tokens like SOL and SUI — the exchange has been able to make customers "whole," i.e. return the dollar value of their accounts at the time of bankruptcy in November 2022.

However, because the crypto market has appreciated significantly since FTX collapsed, some former users would have preferred to receive "in kind" distributions of crypto assets, which, by and large, would be more valuable today than after former CEO Sam Bankman-Fried helped tank the market.

Users are expected to receive 74% of the dollar value of their account holdings on this distribution, with additional payments planned for later. Small claim holders are expected to receive at least 119% of their allowed claim value, total, including interest payments. The overall repayment plan aims to distribute between $14.7 billion and $16.5 billion, with recoveries varying based on claim type and valuation.

In either case, many traders see these FTX unlocks as a potential liquidity source for an upcoming “alt season.”