FTX Creditors Receive 120% Payout: Will They Reinvest in Crypto?

FTX's bankruptcy proceedings have reached a significant milestone with the commencement of payouts to creditors. However, the question remains: will these creditors reinvest in the crypto market?

The FTX collapse in November 2022 was a shock to the crypto industry, leaving thousands of customers with assets stranded in bankruptcy limbo. Two years and three months later, creditors are now seeing a recovery of 120% of their funds, a rare outcome in bankruptcy cases. Unsecured creditors typically recover only a fraction of their claims, but FTX is paying effectively 9% interest on the USD value.

Kraken, one of the official distribution partners for the FTX estate, has begun crediting accounts, while BitGo is expected to follow suit soon. Around $1.2 billion is eligible to be paid to creditors with claims under $50,000, with approximately $400 million worth of claims resold and unlikely to return to crypto.

With $400 million available to original FTX users, the question is: what will they do with the cash? Given the current market sentiment and the caution of those burned by FTX, it's unlikely that they will reinvest all or even most of the funds. However, not everyone agrees. Mena Theodorou, co-founder of crypto exchange Coinstash, suggests that Solana (SOL) may be a major beneficiary, as FTX's historic investments in SOL and the Solana ecosystem could attract some of these funds.

While this payout is significant, it is not likely to be the big liquidity injection that some have been hoping for. The vast majority of claims in nominal terms are those greater than $50k, totaling $17 billion, and for any of that to re-enter crypto, we'll have to wait at least a few months longer.