FTX Digital Markets, the Bahamian subsidiary of the now-defunct cryptocurrency exchange FTX, is set to initiate repayments to its first group of creditors starting Feb. 18. This marks a significant step in the ongoing bankruptcy resolution process following the exchange’s dramatic collapse in November 2022.

Full Reimbursement for Small Creditors

According to a Feb. 4 post by FTX creditor Sunil Kavuri, FTX Digital Markets will begin distributing funds to claimants classified under the "Convenience Class." This group consists of creditors with claims valued at $50,000 or less, who will receive 100% of their approved claim amount along with 9% annual interest accrued since November 2022.

The distribution will be processed through BitGo, a digital asset custody provider, ensuring that eligible creditors receive their funds in a secure and timely manner. However, it remains unclear whether Kraken, another firm involved in the distribution process, will follow the same schedule.

FTX’s debtors have been engaged in a complex bankruptcy process that involves ongoing litigation and asset recovery efforts. On Jan. 3, the exchange's reorganization plan officially took effect, paving the way for these initial repayments. While smaller creditors will see full restitution, larger claimants, including institutional investors and venture capital firms, must wait for further developments as legal proceedings continue.

FTX, once valued at $32 billion, collapsed in November 2022 after revelations that its affiliated trading firm, Alameda Research, had misused customer funds. The ensuing liquidity crisis forced the exchange into bankruptcy and led to criminal charges against its founder and former CEO, Sam Bankman-Fried.

Bankman-Fried was convicted in November 2023 on multiple counts of fraud and conspiracy, resulting in a 25-year prison sentence. Other key executives, including former Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang, pleaded guilty to related charges and cooperated with authorities.

While the upcoming distributions represent progress, the broader bankruptcy case remains unresolved. FTX’s new management, led by restructuring expert John J. Ray III, continues efforts to recover misused funds, which include legal actions against former executives and third parties.

With over $16 billion in total claims, the final resolution for larger creditors is still pending. The Feb. 18 payout will provide some relief to affected users, but the road to full restitution remains long and complex.

As developments unfold, creditors and industry observers will be closely monitoring FTX’s next steps in one of the most significant financial collapses in crypto history.

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