FTX Payout Panic: The Truth Behind the Viral Rumors

Rumors have been circulating across crypto social media that the struggling exchange FTX will begin distributing as much as $11 billion to its creditors starting on October 1. These reports have sparked speculation and anxiety among investors, leading to widespread discussion.

One prominent voice, known as “MartyParty,” advised his 116,000 followers on X to sell their holdings of ETH, ADA, and DOT in anticipation of the upcoming distributions. At the same time, he endorsed other cryptocurrencies like SOL and SUI, adding fuel to the rumors.

Similarly, crypto advisor Dan Held informed his 720,000 followers on X that FTX would begin distributing $16 billion starting the next day, though he also hinted that some traders, often referred to as “degens,” might buy back into the market after the distributions. This added to the growing speculation and uncertainty.

Adding to the noise, “Crypto Rover,” another influencer with 840,000 followers on X, incorrectly stated that FTX distributions would begin this week, further contributing to the atmosphere of fear, uncertainty, and doubt (FUD) in the community.

In truth, these claims are misleading, and there’s no need for the panic selling or fear that has spread. Official documents show that FTX’s legal team is scheduled to appear in court on October 7 to finalize the repayment plan. Until that hearing takes place, no distributions will be made this week.

If the revised repayment plan is approved during the court proceedings, smaller claims—those under $50,000—might begin receiving payouts by the end of 2024. However, larger creditors with more significant claims will likely need to wait longer, with distributions expected in the first or second quarter of 2025.

On September 29, FTX creditor advocate Sunil Kavuri took to X to address the rumors, accusing large accounts of spreading false information. He estimated that about half of the claims, amounting to roughly $5.5 billion, would not be reinvested in cryptocurrency markets.

Back in June, Kavuri and other creditors voiced their objections to FTX’s repayment plan, which favored reimbursement in the form of in-kind assets rather than cash. They argued that this could lead to tax liabilities for creditors, further complicating the process.

Meanwhile, CNBC crypto trader Ran Neuner also worked to debunk the misinformation, assuring the community that FTX’s distributions would begin within 60 days of the repayment plan becoming effective, once approved by the court.

Despite these reassurances, crypto markets experienced a sell-off during Monday morning trading in Asia. The total market capitalization dropped by 2.7%, with Bitcoin falling to around $64,500 after peaking at $66,000 over the weekend. This market reaction highlights the impact of rumors and misinformation on investor behavior, even when those rumors are later disproven.

Over the last two weeks, FTT has gained more than 70%, largely due to rumors of impending reimbursements. Despite this recent upward momentum, the token remains down by a staggering 97.5% from its all-time high of $84, which it reached back in September 2021.

In summary, while rumors of FTX distributions have stirred up excitement and fear in the crypto community, the reality is more measured. Distributions