New Developments in FTX Debt Liquidation: Detailed Explanation of the Claims Process and Important Considerations

With the sentencing of the actual controller of the FTX case to 25 years in prison, the case has come to a temporary conclusion. For the vast number of investors and creditors, the most concerning aspect is the progress of the FTX bankruptcy liquidation case, which is directly related to whether the debts can be effectively repaid. As the largest bankruptcy liquidation case in the world today, the handling of the FTX case has attracted global investor attention, and its approach will become a benchmark case of significant reference value.

Since 2022, the FTX case has undergone multiple rounds of debt claims. Due to disputes over the execution of the liquidation plan, coupled with the bankruptcy assets not being quickly liquidated, the road to repayment for creditors has been long and difficult. Currently, the liquidation entity of FTX and the claims portal have been established and opened, and creditor repayments are about to begin. This article aims to provide investors with a detailed "FTX Debt Claim Guide" to assist in their rights protection journey.

Background of the FTX Case and Overview of the Liquidation Team

FTX was established in 2019 and was a cryptocurrency exchange that competed with top exchanges, headquartered in the Bahamas, with its main business focused in the United States. FTX is large in scale, owning hundreds of affiliated companies, with clients spread across the globe and a user count reaching millions. After completing its Series C funding round in 2022, FTX was valued at as much as $32 billion.

The collapse of FTX was rapid and irreversible. At the end of 2022, a media outlet published a report revealing that Alameda Research held a large amount of FTX's own issued FTT tokens. Subsequently, a trading platform announced the liquidation of its FTT holdings, triggering market panic, and eventually leading FTX into a death spiral.

Given that FTX is headquartered in the Bahamas but conducts its main business through subsidiaries in the United States, FTX has bankruptcy assets in both jurisdictions. On November 14, 2022, the Supreme Court of the Bahamas appointed a temporary liquidator to initiate the liquidation process for FTX Digital. The Delaware court in the United States processed the bankruptcy of FTX Trading Limited and its affiliated entities under Chapter 11 of the U.S. Bankruptcy Code and recognized the Bahamas' temporary liquidation on February 15, 2023.

At the end of 2023, the Supreme Court of the Bahamas appointed Joint Official Liquidators (JOL) to be responsible for the asset liquidation and creditor compensation of FTX Digital and its affiliated companies. Currently, the JOL has established a dedicated FTX creditor claim submission website to uniformly handle claims from customers, non-customers, and assigned creditors. The submission deadline is May 15, 2024.

FTX Claim Filing Guide

1. Register Claim Account

First, creditors need to visit the FTX creditor claim and claim portal and register a personal claim account. During registration, they need to fill in information such as name, email, country and region, and contact information. It is recommended to use a reliable email for registration, as subsequent logins will require an email verification code.

When registering, you must correctly select the type of claimant: individual customer, institutional customer, or non-customer creditor. Individual users should select "individual customer", accounts registered by legal entities should select "institutional customer", and those who are non-FTX customers but have a creditor-debtor relationship with FTX or its affiliated companies should select "non-customer creditor".

2. Register creditor and customer account details

For individual or corporate clients, it is necessary to submit FTX account registration information on the application page to link the claim account with the FTX account. After linking, the website will display a debt balance confirmation page. Be sure to carefully verify that the displayed balance and assets match those in the FTX account. Once confirmed, click the confirm button, and the relevant assets will enter the claims process.

If there are discrepancies regarding account assets, additional materials must be provided to JOL through the objection procedure. It is recommended to consult professionals to prepare the required declaration materials, especially for entities that are non-client creditors.

For the assigned FTX bankruptcy claims, a complete assignment proof must be submitted. If there are any guarantees associated with the claims, relevant documents must also be submitted to prevent the guarantees from becoming invalid.

Finally, after completing the KYC process, the declaration of claims is completed.

Explanation about Duplicate Declaration

For investors who have already declared bankruptcy claims on the KROLL platform, declaring again on the FTX bankruptcy claims portal designated by the Bahamas will have two legal consequences:

1. Considered as a withdrawal of claims and demands against FTX Trading Ltd. and its affiliates under the U.S. Bankruptcy Code.

2. Bankruptcy claims are transferred to the jurisdiction of the Bahamian courts and processed in accordance with Bahamian law.

It is worth noting that the United States and the Bahamas have reached a preliminary consensus on the liquidation of the bankrupt estate, which will be distributed as a whole after the liquidation is completed. Therefore, there will be no substantial unfairness in the compensation process for creditors filing claims in the Bahamas or the United States.

This choice mainly affects aspects such as creditor recognition, recognition ratio, and objection handling, which are closely related to the interests of creditors. It is recommended to consult a professional legal team before making a choice to ensure maximum protection of one's rights.