Many crypto influencers have been stating that the bankrupt FTX, a former crypto exchange and crypto hedge fund, will commence distribution in January 2025. However, the news turns out to be fake. The company does not have plans to start distribution before March 2025. With an expected $16 billion disbursement, the prospects of FTX payouts in January were slowly fuelling the market trends. However, investors should wait for a couple of months to see the plan set in.
In an official statement, FTX stated that although its reorganization plan will take shape in January, the first payout will be made 60 days later, in March. Contrary to the news, the company has stated that it has no plans to make a disbursement of $16 billion as the company’s current cash reserves are around $13 billion, which is projected to soar high to $14 billion by March.
FTX Bankruptcy
FTX’s bankruptcy in 2022 spread widespread mistrust among cryptocurrency investors. The fact that FTX was the third-largest cryptocurrency exchange at the time added to the impact of its fall. The US government initiated criminal proceedings against the company and its CEO Sam Bankman-Fried was sentenced to 25 years in prison and was ordered to repay $11 billion.
The bankruptcy was caused by news that the FTX exchange had invested most of its funds in Alameda Research, its sister concern. Alameda Research consisted of FTT and other tokens invented and controlled by FTX and its allies, rather than market-driven, time-tested fiat currency or cryptocurrency. Many people withdrew their investments with the FTX exchange, thus leading it to bankruptcy. This made a gap in the financial security of FTX with a sudden shortage of $8 billion.
The collapse of the FTX exchange and the subsequent bankruptcy of Alameda Research and over 100 affiliated entities widely impacted the cryptocurrency market and created trust issues among many investors. This incident strengthened the general belief that cryptocurrencies were vulnerable to fraud. The prosecutors of the American federal government stated that it was one of the largest financial frauds in the history of the country. Soon after the event, Sam Bankman-Fried’s net worth fell from $16 billion to nil in a matter of days.
Many institutional investors of the FTX exchange such as Tiger Global Management, the Ontario Teachers’ Pension Plan, SoftBank Group, BlackRock, Lightspeed Venture Partners, Temasek, and Sequoia Capital wrote off their investments in the FTX exchange following its bankruptcy.
Impact of FTX’s Collapse on Other Crypto Ventures and Currencies
The impact of the collapse of FTX was seen in other prominent cryptocurrencies such as Bitcoin, which fell to its lowest price in years. The share prices of publicly traded cryptocurrencies dropped to an all-time low. Solana, the cryptocurrency associated with the FTX exchange, also fell to lower levels. The crisis at FTX had its impact on other cryptocurrency exchanges too. Investors began to withdraw their holdings from other exchanges in anticipation of such failures and bankruptcy. The exchange Crypto.com was in fear of bankruptcy as its native token Cronos also declined in value.
Several lawsuits and legal recovery measures were initiated against the FTX exchange. The Royal Bahamas Police Force launched a criminal investigation into the workings of the company. A class-action lawsuit was filed against FTX and several other prominent persons related to the exchange such as American footballer Tom Brady and comedian Larry David, Gisele Bündchen, David Ortiz, Kevin O’Leary, Shohei Ohtani, Shaquille O’Neal, Naomi Osaka, Trevor Lawrence, Steph Curry, Udonis Haslem.
Many other exchanges such as Gemini paused withdrawals on its earn program, fearing bankruptcy. Cronos, the native token of the cryptocurrency exchange Crypto.com, lost almost $1 billion in value after FTX’s failure.
The Bottom Line
FTX bankruptcy was the darkest phase in the history of cryptocurrencies, impacting many investors worldwide. Given its widespread impact, any news about payouts or reimbursement plans to compensate for the loss suffered by investors will be embarrassed wholeheartedly. However, investors should cross-check the veracity of such news and act wisely. The rise of this false news and the subsequent clarification by the authorities reinforces the need to check and ensure every new development in the cryptocurrency space before finalizing investments.
