Users affected by FTX’s 2022 crash will begin receiving bankruptcy distributions, with the option to receive payouts in stablecoins, through Kraken and BitGo.

The FTX estate confirmed that its bankruptcy disbursement plan will become effective on January 3, 2025, following court approval by U.S. District Judge John Dorsey in October.

Sunil Kavuri, a spokesperson for FTX’s largest creditor group, identified Kraken and BitGo as the confirmed distribution partners, citing the platforms’ payment capabilities. According to Kavuri, customers will have the option to receive repayments in stablecoins.

The plan, ruled by Judge Dorsey in Delaware, approved 98% of creditors to receive 118% of their claim value in early October. FTX’s decision to repay users in cash drew criticism from Kavuri and other bankruptcy claimants.

Yet, court documents showed that 94% of creditors with claims against the crypto exchange voted “Yes” to the plan. This group comprises nearly $7 billion in claims, according to the reorganization plan.

Bankruptcy administrator John J. Ray III commended his interim team for recovering about $16 billion in assets and cash for FTX creditors. Ray took over as CEO in late 2022, replacing Sam Bankman-Fried. Companies under the FTX umbrella, such as Alameda Research, also collapsed, and several of Bankman-Fried’s top associates signed plea deals with federal prosecutors in exchange for lighter sentences.

By November 2023, Bankman-Fried was found guilty on seven charges and sentenced to 25 years in prison for fraud. Under CEO Ray’s leadership, the defunct crypto exchange has worked to reconstruct the remnants of Bankman-Fried’s one-time crypto empire.

For the past two years, our team of professionals have meticulously and efficiently worked to recover billions of dollars to reach this point. The Plan becoming effective in January 2025 and the start of distributions are reflections of the outstanding success of the recovery efforts.

John J. Ray III, FTX CEO

Kraken’s Australian entity, Bit Trade, is facing a multi-million fine for failing to comply with rules requiring a target market determination for its margin extension product.

The Australian operator of the Kraken crypto exchange, Bit Trade, has been fined AUD 8 million (around $5.2 million) for unlawfully issuing a credit facility to more than 1,100 customers, the Australian Securities and Investments Commission said in a Thursday press release, Dec. 12.

The Federal Court ruled that the company failed to follow Australian laws requiring financial products to have a target market determination to ensure they are sold to the right customers.

From October 2021, Bit Trade offered a margin extension product that “provided for margin extensions to be made and repaid in either digital assets like Bitcoin (BTC) or national currencies such as U.S. dollars,” the regulator says. However, the product was marketed without a required target market determination, a key regulatory document meant to ensure financial products are offered only to suitable customers.

The court found Bit Trade’s product breached design and distribution obligations requirements every time it was issued without a target market determination. Customers were charged fees and interest exceeding $7 million, with trading losses surpassing $5 million, the regulator claims.

One investor reportedly lost nearly $4 million using the margin extension product. Justice Nicholas, in his ruling, described Bit Trade’s actions as “serious and motivated by a desire to maximize revenue,” adding that the company failed to address compliance requirements until flagged by ASIC.

Commenting on the ruling, ASIC Chair Joe Longo called it a “significant outcome,” adding that “it is ASIC’s first penalty against an entity for failing to have a TMD and a reminder for digital assets firms to consider their regulatory compliance obligations.” In addition to the fine, Bit Trade was ordered to cover ASIC’s legal costs.

Kraken has announced the shutdown of its NFT marketplace to redirect resources toward new initiatives. 

The marketplace will transition into withdrawal-only mode on November 27, 2024, and fully cease operations on February 27, 2025, according to an email from Kraken seen by crypto.news. 

Kraken explained that the closure will allow the company to focus on undisclosed “new products and services.” Users are urged to withdraw their NFTs to self-custodial wallets or Kraken Wallets before the February deadline.