(Bloomberg) — Former cryptocurrency firm FTX will start paying its main creditors at the end of May using a cash hoard of $11.4 billion the company has collected since its shut down.
Although minor creditors, who hold what FTX classified as “convenience claims,” have already started getting payments, the company will make its first payment to the main group of debt holders on May 30, bankruptcy attorney Andrew Dietderich told the judge who recently took over management of the Chapter 11 case.
The firm’s main creditors include investors owed millions of dollars as well as institutions that had crypto on the FTX platform.
The 2022 collapse of what was once one of the top cryptocurrency exchanges left a vast swath of creditors of all ilks behind. Getting through all the claims quickly will preserve the most value, although the task is hindered by the enormous number of claimants to emerge from the exchange’s infamous downfall. Bitcoin has climbed more than fourfold since FTX’s bankruptcy, adding further insult to many former customers who sought to be paid in digital assets instead of dollars.
Paying out all creditors will take time because the company faces a very large number of “claims that we think are specious,” Dietderich told US Bankruptcy Judge Karen Owens, in Wilmington, Delaware. Some of those questionable claims may conflict with “know your customer” rules that require FTX to verify the identity of all of its creditors, while others may involve demands for payment that are not legitimate, the lawyer said.
FTX faces “27 quintillion” claims, he said. A quintillion is 1 billion times bigger than 1 billion, and written as a 1 followed by 18 zeros. In bankruptcy, large numbers of duplicate, inflated and false claims are commonly weeded out by lawyers after a payout plan has been approved by a judge. FTX faces “billions” of flawed claims, according to Dietderich.
The company needs to pay legitimate creditors as quickly as possible because the interest rate FTX is earning on the $11.4 billion is smaller than the 9% rate creditors earn while waiting for their cash, he said.
FTX filed bankruptcy in November 2022 after the company’s crypto-trading platform was shut down and was handed to insolvency experts. It won court permission of its payout plan in October.
The case is FTX Trading Ltd., 22-11068, US Bankruptcy Court for the District of Delaware.
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