In a recent update, FTX, the now-defunct crypto exchange, has struck a settlement deal with Bybit, a cryptocurrency platform based in UAE.
The agreement allows FTX to withdraw assets amounting to $228 million, a move expected to help repay several creditors affected by the collapse of FTX in 2022. This has been the outcome of intricate negotiations spanning several months between FTX, under the management of Sam Bankman-Fried facing a 25-year sentence at the time.
Elaborating on the Settlement
According to a report on Bloomberg, to reach this agreement FTX must drop all lawsuits against Bybit Fintech Ltd. and its related entities. The manner in which FTX received the green light from the US Bankruptcy Court for the District of Delaware for this settlement is laid out in the company’s application. As per the agreed terms, FTX is set to recoup around $175 million in digital assets held on Bybit and sell BIT tokens to Bybit’s investment wing, Mirana Corp., for an estimated $53 million.
Before FTX crumbled, it filed a lawsuit against Mirana, arguing that the latter took out assets valued at $327 million from FTX, using extraordinary access, while other users could not reach their funds. The settlement now states that those, who withdrew funds just prior to FTX’s bankruptcy announcement, may receive creditor claims, representing 75% of their total balance at the time bankruptcy was filed by FTX. FTX regards this agreement as beneficial, translating into significant net savings for the debtor’s estates.
In its submission, the company expressed confidence in the settlement, stating, “With the Settlement Agreement, the Debtors will be recovering substantially all that they are seeking. This settlement will aid in securing a significant recovery for stakeholders, while bypassing the expenses and insecurity connected to the ongoing litigation and potential enforcement difficulties overseas.”
Implications for Creditor Paybacks and Market Impact
With K33 analysts Vetle Lunde and David Zimmerman providing future outlooks, the debt recovery process for the creditors is anticipated to set off in late Q4, 2024, and extend into the early first quarter of 2025. The pair envisage that repayments will likely commence within a 60-day period from the court’s effective date, which is speculated to be determined around mid-November. The U.S. Bankruptcy Court’s Judge John Dorsey has ratified a reorganization scheme for this purpose, almost two years post the demise of FTX.
Some industry analysts speculate that injecting these funds back into the market might elevate Bitcoin prices. Yet, due to credit funds already having acquired a significant amount of claims, ranging between $14.4 billion and $16.3 billion, it seems improbable that these assets will be reintroduced to market circulation. Additionally, 33% of the remaining claims are linked to individuals and entities facing sanctions or lacking customer verification, a situation that precludes claim retrieve due to inadequate validation. Consequently, only an estimated 20-40% of the standing $8 billion will re-enter the market, largely because FTX’s trader base primarily consisted of “aggressive, crypto-native risk-takers”.
Currently, the native token of the exchange, FTT, is being traded at $1.80.
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