BitGo and Kraken Start Distributing $5B in Payouts to Former FTX Users

Crypto exchanges BitGo and Kraken have commenced the distribution of over $5 billion in payouts. The payments are being made to former users of the collapsed exchange FTX. This marks a pivotal step in rectifying one of the most notable failures in crypto history.

FTX Begins $5 Billion Payout

In an X post, FTX stated that former users should expect to receive funds within one to three business days. The exchange also warned customers to watch out for phishing attempts and fake websites posing as the official customer portal. 

Earlier this year, the exchange announced it would begin distributing more than $5 billion to creditors. The payment is part of the second phase of its Chapter 11 reorganization plan, with distributions starting on May 30.

The exchange requires users to log in to the FTX customer portal and complete Know Your Customer (KYC) verification. They must also submit the necessary tax documentation through the FTX Debtors’ Customer Portal to receive their payouts.

According to the exchange, payouts in the second round of distributions will follow a specific priority system known as a “waterfall.” This means that certain groups of creditors are paid before others, depending on their classification under the bankruptcy plan.

For instance, customers of FTX.com, the global exchange, are receiving 72% of their approved claims. U.S. customers, on the other hand, are receiving 54%. Furthermore, creditors with general unsecured claims, such as vendors or business partners, and those who had loaned digital assets to FTX are each receiving 61% of their claims. 

Ongoing Legal Issues 

FTX has been embroiled in several legal issues since its 2022 collapse that sent shock waves through the crypto industry. Earlier this month, leading crypto exchange Binance requested that a court dismiss FTX’s $1.76 billion clawback lawsuit.  According to the exchange, FTX is unfairly placing blame on it and its co-founder Changpeng Zhao (CZ). It argued that this was an attempt by FTX to deflect responsibility for its own collapse.

Meanwhile, FTX’s former CEO Sam Bankman-Fried, the central figure behind the firm’s collapse was sentenced to a 25-year prison sentence in March 2024. However, a recent report stated that his sentence will be reduced by four and a half years. Thus, he will be released in 2044 instead of 2049. 

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