FTX Creditors Lose Twice as Crypto Market Rally Erases Gains From Cash Repayments

Creditors of the defunct FTX exchange may recover only a fraction of what they once expected, as soaring digital-asset prices distort the real value of their upcoming repayments.

On November 2, FTX creditor advocate Suni Kavuri released new recovery estimates for affected users. He projected that payouts could equal as little as 9% to 46% of the crypto value those users originally lost.

Crypto Surge Turns FTX Repayments Into Deep Losses for Creditors

His analysis highlights a widening gap between the court-approved dollar settlements and the market prices of key assets, such as Bitcoin. These cryptocurrencies have all surged sharply since FTX collapsed in November 2022.

Kavuri’s data illustrates how the rally has worked against victims.

When the bankruptcy was filed, Bitcoin traded around $16,871. Today, its value exceeds $110,000, meaning that a 143% cash recovery equals only about 22% of the equivalent BTC amount.

ETH’s rebound to roughly $4,000 reduces the real recovery to 46%, while Solana’s climb to around $200 cuts creditor value to approximately 12%.

This recalculation reignited debate within the creditor community. Many now argue that FTX’s move to convert all claims into US dollars froze their holdings at the market’s lowest point. They see it as a decision that locked in losses, while others now profit from the rebound.

From prison, Sam Bankman-Fried has echoed some of these frustrations.

The disgraced founder recently claimed that FTX was never truly insolvent. He also argued that if customers had been repaid earlier, they could have repurchased their coins before prices exploded.

“Without the two-year wait, in-kind vs. dollarized wouldn’t matter much; if a customer got $17,000, they could just buy back the bitcoin they had in the first place. But as is, some customers are being repaid today less than the current value of the crypto they were originally owed,” SBF wrote.

However, the FTX estate has previously argued that the conversion was not arbitrary. It said the move was required under U.S. bankruptcy law, which values all claims as of the filing date to simplify distribution.

According to them, fixing liabilities in one currency reduces the cost and complexity of dealing with volatile assets. It also protects the estate from further price swings by setting a clear reference point.

In essence, dollarization removes exchange-rate uncertainty for the group as a whole but leaves individual creditors to manage their own exposure afterward.