FTX’s Bizarre Twist: Small Creditors Score 120% Payouts While Big Players Take Haircuts
In a plot twist worthy of crypto's wildest soap opera, FTX's bankruptcy saga delivers uneven justice.
Small fry win big
Retail creditors are popping champagne with 120% recoveries—a rare W in bankruptcy court. Meanwhile, whales are left licking wounds with partial settlements.
Whale-sized haircuts
The tiered payout structure exposes bankruptcy's brutal hierarchy: the little guy gets made whole (plus extra), while institutional claims get the scissors treatment. Just another day in decentralized finance—where even failure comes with tiered VIP access.
Closing thought: Maybe next time hedge funds will read the terms of service before dumping nine figures into a Bahamian casino.
FTX Payout Progress
Sunil Kavuri, the FTX creditor activist, revealed that claims under $50,000 received 120% payouts in February and May 2025, allowing smaller creditors to recover beyond their initial claims.
In his latest post on X, Kavuri explained that for claims over $50,000, creditors received a 72.5% payout in May. The remaining 27.5% expected in additional distributions planned for October and December 2026, and into 2027, which will bring total recovery on larger claims to 100% of face value.
Kavuri added that post-petition interest returns are estimated to range between 40% and 80%.
BitGo and Kraken were the two custodians overseeing the distribution process. These payments are being made under a Chapter 11 plan, which was approved by a bankruptcy judge in Delaware last year.
FTX, FTX.US, Alameda Research, and more than 100 affiliated companies sought bankruptcy protection in Delaware on November 11, 2022. After the bankruptcy filing, Sam Bankman-Fried resigned as CEO, and corporate restructuring expert John J. RAY III was appointed to lead the company. The latter had previously handled Enron’s collapse.
Bankman-Fried received a 25-year sentence for defrauding customers and investors. Meanwhile, former Alameda Research CEO Caroline Ellison was sentenced to two years in federal prison.
Beyond the criminal convictions of its top executives, the collapse also sparked lawsuits against celebrities and influencers who had endorsed the platform.
Celebrities Largely Cleared in FTX Lawsuits
In May, a US court dismissed the bulk of lawsuits brought against several celebrities and YouTubers who endorsed the crypto exchange before its collapse. Among those who benefited from the dismissal are Tom Brady, Gisele Bündchen, Kevin O’Leary, and Stephen Curry.
The same cannot be said for Shaquille O’Neal. The NBA legend agreed to pay $1.8 million to settle a class-action lawsuit from investors of FTX, who alleged he misled them through his appearances in exchange advertisements. This payout is more than the $750,000 O’Neal reportedly received for the commercial.
O’Neal claimed that he was only a paid actor, and WOULD avoid admitting wrongdoing, and would also be barred from seeking reimbursement from the exchange’s bankruptcy estate if the court approves the settlement.
