The promised recovery of 143% of FTX creditors falls short. High crypto prices mean the true crypto recovery rate is only 9% to 46%.
Creditors of the defunct FTX exchange are now facing a big one shortage. This despite the promise of a nominal payout of 143%. FTX credit representative Sunil confirmed the actual recovery rate. He said the actual crypto recovery is between 9% and 46%. Therefore, creditors are still not compensated in real crypto terms. The final value could be even lower due to the high prices of cryptos right now.
Real recovery rate significantly lower than the nominal payout
Initially, the nominal payout of 143% is based on the value of the assets. This valuation was noted when the bankruptcy was filed. However, the price of crypto has risen significantly since then. The purchasing power of the fiat payout is thus reduced. Consequently, the money buys far fewer tokens than in the past. This inequality is the cause of the real recovery deficit.
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Specifically, the FTX Recovery Trust began its second major payout in May. This payment amounted to $5 billion to eligible creditors. Moreover, the benefit was multi-claim. These include Dotcom customer rights claims 72% and US customer rights claims 54%. Convenience Claims was the highest winner with a payout of 120%.
In addition, the first round of payments took place earlier. For recipients with smaller claims, this was on February 18. Ultimately, these claims totaled less than $50,000. That very first payment was $1.2 billion. Therefore, the recovery process has already generated billions of dollars for the affected parties.
In addition, general unsecured claims and digital asset loan claims will be paid out. These groups receive 61% of their claims. These funds will then reach the recipients shortly. Payouts are made possible through websites such as Kraken and BitGo. This process is carried out to ensure that delivery is fast and efficient.
On the other hand, the emphasis is still on real-world value. The recovery is expressed in fiat money. Therefore, the recovery is not full compensation for the creditors. It does not replace the crypto assets they originally owned.
Airdrops offer creditors a path to “additional recovery” beyond bankruptcy
However, further recovery is expected in the near future. This will mainly come from airdrops from external projects. As a result, these airdrops will be distributed directly to FTX creditors. This recovery takes place completely outside the actual bankruptcy process. It is therefore a unique opportunity to partially compensate.
Sunil referred to such a possibility in connection with ‘additional recovery’. He mentioned Paradex as an example of a project where tokens have already been dropped. Moreover, he wrote that more projects are likely to follow in the near future. These external initiatives are therefore an important point of attention for creditors.
He further emphasized the importance of the creditor list. He said that specifically FTX creditors are attractive for projects. They are considered the most valuable asset for the new token launches. So projects use these air droplets to achieve an initial level of traction. Consequently, this strategy effectively leverages the creditor community.
After all, this double recovery model offers some relief. Therefore, the nominal fiat payout guarantees a basic rate of return. Moreover, there is a chance of benefit from the external air droplets. However, the harsh reality is that the actual recovery rate varies from 9% to 46%. The market gives a clear indication that the fiat value is missing.
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