FTX Token (FTT) Spikes 60% Following Rumors About Creditor Repayments

Key Takeaways:

• The FTT Token surge followed rumors about FTX starting repayments on September 30.
• The rumors are false, as the court session to approve the reorganization plan is set for October 7, 2024.
• Creditors are not pleased; they may receive 10–25% of their cryptocurrency holdings.

FTX Token Leads Market Gainers

The FTX Token (FTT), the native cryptocurrency of the bankrupt FTX cryptocurrency exchange, has experienced the highest increase in value among the top 100 coins by market capitalization.

This surge came after the speculation regarding creditor repayments, which was expected to begin on September 30.

After plummeting to as low as $0.7763 in June 2023, a few months after the collapse of the exchange under its recently jailed founder, Sam Bankman-Fried (SBF), the price of the FTT token has risen to $2.13 today. However, this is still notably lower than its all-time high of $85.02 on September 9, 2021.

Despite the FTT token losing over 80% of its value and erasing more than $2 billion in customer holdings following the FTX exchange collapse, its recent performance has predictably led to a 3669.24% increase in its 24-hour trading volume, which currently stands at $360,544,918 as of the time of writing this statement.

FTX Token (FTT) Surged on False Speculations About FTX Creditor Repayments

Before the sudden surge of the FTX Token (FTT) to become the 89th largest coin by market capitalization, the community's increasing speculation about the possibility of the defunct crypto exchange FTX starting to repay its creditors and customers began.

A highly followed crypto influencer, Crypto Rover, ignited the excitement with a tweet on Sunday, September 29, to his 840k followers, stating that FTX is poised to initiate its $16 billion repayment process as early as Monday.

💥BREAKING: FTX will start its $16 BILLION repayment to its creditors tomorrow. pic.twitter.com/ePIcXpsFE9

— Crypto Rover (@rovercrc) September 29, 2024

This came as a surprise to many members of the X crypto community, some of whom asked for evidence of the source of the information. They advised popular YouTubers to avoid spreading misinformation.

Meanwhile, further investigation revealed that the rumors are false, as a court of law has not yet approved the reimbursement plan.

🚨 BEWARE OF FALSE INFORMATION, FTX DISTRIBUTION WILL NOT START NEXT WEEK!

First of all, I would like to point out that you have to be careful what and where you read, because even such large accounts like @rovercrc with huge reach can mislead you.

The decision regarding the… pic.twitter.com/S1vf1tqOkY

— CryptoTrail (@CryptoTrail_) September 27, 2024

The recently updated Chapter 11 filing shows that the upcoming court session to approve the reorganization plan is set for October 7, 2024.

If the plan is approved, people with claims totaling less than $50,000 could begin to receive payments by the end of 2024. However, those with larger claims may expect payments in the first or second quarter of 2025.

Creditors Receive 10–25% of their Crypto Holdings

Unfortunately, recently updated bankruptcy documents circulating online indicate that FTX creditors will only be able to recover 10–25% of their cryptocurrency holdings.

Creditors argue that they will be repaid based on cryptocurrency prices at the time of the legal filing, which were significantly lower than they are today. Bitcoin (BTC) was valued at around $16,000 when the legal petition was submitted.

As per a post by Sunil Kavuri, a self-proclaimed FTX creditor activist, FTX plans to allocate 18% of DOJ forfeiture funds, up to $230 million, to FTX equity holders.

FTX is transferring 18% of DOJ forfeiture funds up to $230m to FTX equity holders (Plan supplement)

FTX crypto holders are getting 10% to 25% of their crypto back pic.twitter.com/3f6BePpoNU

— Sunil (FTX Creditor Champion) (@sunil_trades) September 28, 2024

 This recent revelation offers a rough estimate of the amount creditors will receive based on cryptocurrency values at the time of the petition compared to their current value.

For example, if a creditor had 1 Bitcoin on the exchange before it collapsed in November 2022, they would be classified as a convenience-class creditor. Considering the Bitcoin price at the time of the event, the creditor would receive $16.7k for their Bitcoin, plus an additional 19%, totaling about $19.8k.

Given the current Bitcoin price of $65k, the creditor will receive the equivalent of 0.3 BTC, resulting in a 70% loss of their original BTC, while the debtors compensate shareholders. Many thanks to commenter “@_sradic_” for the detailed explanation.

This has stirred up numerous controversies in the crypto community, particularly among FTX creditors who argue that the legal system fails to protect investors. Consequently, the recent sharp increase in the FTX Token (FTT) price may be short-lived as speculation about repayment dampens.