FTX customers to get distributions through Kraken and BitGo with bankruptcy plan set to be effective on Jan. 3

Customers affected by crypto exchange FTX's collapse will be able to receive bankruptcy distributions through Kraken and BitGo as its plan is set to be effective on Jan. 3, 2025.

The "initial distribution" is expected to happen within 60 days of the effective date, FTX said on Monday in a statement.

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

Earlier, a representative of the largest FTX creditor group Sunil Kavuri noted that FTX posted two distribution partners, Kraken and BitGo, with a third coming soon. Funds can also be distributed through stablecoins, Kavuri added. 

In a statement, Kraken noted it was tapped to help distribute funds for Mt. Gox creditors this past year. Mt. Gox was founded in 2010 and became the largest bitcoin exchange in the world until it suffered a security breach in 2014 that caused the loss of 850,000 bitcoin.

"To prove we back client account holdings with in-kind, fully reserved assets, we pioneered the Proof of Reserves process in 2014 and have committed to undertaking it regularly since January 2022," Kraken said on Monday. "In 2014, we were asked to support the investigation following the collapse of Mt. Gox and in 2024 we were selected to support the distribution of funds to Mt. Gox creditors."

BitGo said it has “safeguarded billions in crypto assets for institutions, prioritizing safety and transparency above all."

"BitGo is proud to support FTX," said CEO Mike Belshe in the statement. "With our long-standing reputation as the most secure choice in the industry, we work hard to bring institutional-grade service to both retail and institutional clients, ensuring users the peace of mind they need to manage and grow their assets safely."

Judge John Dorsey in the U.S. Bankruptcy Court for the District of Delaware approved FTX's bankruptcy plan in October, two years after the exchange filed for bankruptcy. Under the plan, 98% of creditors will receive at least 118% of their claim value in cash.

About 94% of creditors in the “dotcom customer entitlement claims” class who returned their ballots — representing about $6.83 billion in claims by value — voted in favor of the reorganization plan, according to previous The Block reporting.

The plan also garnered criticism from Kavuri who said the estate should pay out cryptocurrencies in kind rather than the dollar value when the exchange filed for bankruptcy back in 2022.

FTX filed for bankruptcy in late 2022. The exchange's CEO, Sam Bankman-Fried, was found guilty in November 2023 of seven criminal counts, including two counts each of wire fraud and conspiracy to commit wire fraud, and was sentenced to nearly 25 years in prison. Sister trading firm Alameda also subsequently fell, and its CEO Caroline Ellison was sentenced to two years for her role in the downfall of FTX.