FTX has announced plans to distribute $1.9 billion to creditors beginning 30 September, marking its third major repayment round since the company filed for bankruptcy. The funds, which were previously reserved for disputed claims, are now eligible for release following a recent court ruling. However, creditors in certain jurisdictions, including China, are unlikely to be included in this round of repayments.

Third Round of Distributions Set

The FTX Recovery Trust and debtor entity FTX Trading confirmed that eligible claim holders will be determined based on a record date of 15 August. This upcoming payout follows two previous distributions – $1.2 billion in February and $5 billion announced in May. The new tranche of funds comes after the bankruptcy court approved a reduction in the disputed claims reserve from $6.5 billion to $4.3 billion, effectively freeing up $1.9 billion for distribution to approved claimants.

Disputed Claims Still Include Major Jurisdictions

Despite the progress, a significant portion of claims – worth $4.3 billion – remains in dispute. These include claims from creditors in jurisdictions flagged for potential legal or regulatory issues. According to creditor Sunil Kavuri, this next payout will almost certainly exclude Chinese claimants and others listed in a pending motion addressing restricted jurisdictions.

“Their claims have not been allowed yet and are unlikely to be allowed by the record date on 15 August,” Kavuri explained, adding that the original motion is currently undergoing revisions.

Ongoing Legal Process Around Restricted Jurisdictions

The question of how to handle payments to creditors from 49 jurisdictions deemed restricted remains unresolved. A court hearing on 22 July was expected to rule on the matter, but instead, the judge approved a request from FTX for more time to revise the motion. The estate had received nearly 90 formal objections to the original filing, prompting the need for further clarification and a more workable framework.

US bankruptcy court records show that while the judge granted FTX’s Motion for Leave, allowing more time to amend the proposal, no decision has been made on the core issue. The judge also emphasised that creditors’ funds could not be seized and instructed the estate to develop a clear path for reclassification of jurisdictions from restricted to non-restricted.

Partial Payments May Be Topped Up

The upcoming round of distributions is also expected to include additional payments to claimants who had already received partial compensation. This applies especially to those with approved claims exceeding $50,000. However, exact details on who will receive funds and how much they will get remain uncertain until the eligibility assessment is completed next month.

A Complicated but Gradual Recovery

While the September payout signals meaningful progress in the bankruptcy proceedings, the issue of restricted jurisdictions continues to complicate FTX’s effort to deliver equitable settlements. The estate is under pressure to provide more transparent guidelines and ensure that creditors in flagged regions have a fair chance to prove their eligibility.

As the court awaits a revised motion, creditors excluded from the upcoming distribution will be watching closely for updates that might allow them to participate in future rounds.