On March 31, 2026, the FTX Recovery Trust officially launched its fourth round of creditor distribution, totaling approximately $2.2 billion. With funds being deposited into accounts via channels such as BitGo, Kraken, and Payoneer within one to three business days, this most famous bankruptcy case in crypto history appears to be heading towards a seemingly satisfactory conclusion.

On the surface, this appears to be a victory for Web3 infrastructure. Compared to the lengthy liquidation processes of Lehman Brothers (14 years) and Enron (11 years), FTX achieved an astonishingly high recovery rate in just over three years—100% full recovery for US customers (Class 5B), an overpayment of 120% for Convenience Class creditors, and approximately 96% for Class 5A creditors. The transparency, traceability, and extremely high liquidity of on-chain assets enabled bankruptcy liquidation to proceed far faster than in the traditional financial system.

However, behind the impressive figure of "120% overpayment" lies a brutal and hidden wealth transfer within the cryptocurrency market. When we delve into the flow of these $2.2 billion, we find that the biggest beneficiaries of this distribution are no longer the original FTX users who wept in despair in November 2022, but rather traditional financial distressed asset funds that are well-versed in cyclical patterns. The crypto crash may be inadvertently providing traditional finance with an epic "blood transfusion."

To understand the nature of this wealth transfer, it is first necessary to clarify the valuation benchmark used by the bankruptcy court. Within FTX's liquidation framework, all payouts were strictly pegged to the fiat currency value of the cryptocurrency at the time FTX filed for bankruptcy in November 2022.

This is a snapshot of prices at an extreme bottom!

At the time, Bitcoin was priced at only $16,871 . This meant that if a user held 10 BTC before the FTX crash, their legal claim was locked at approximately $168,710. Today, if they received a 100% or even 120% "overpayment," the absolute amount they would receive would be between $168,000 and $200,000. However, in the real market at the end of March 2026, 10 BTC would be worth approximately $670,000.

Original cryptocurrency holders received back "crash-priced dollars," not the appreciation of the assets themselves. The huge price difference (over $400,000 in missed-op costs) is essentially a "hidden tax" paid by the original creditors to obtain fiat currency liquidity. While bankruptcy reorganization legally protects the integrity of the dollar standard, it effectively deprives native crypto users of the beta gains they deserved during the subsequent three-year recovery cycle. This seemingly fair full legal compensation is tantamount to a second systemic plunder for investors who believe in the crypto standard.

If the original users' missed opportunities are a helpless consequence of bankruptcy law, then the booming secondary claims market is the ultimate manifestation of capital's bloodthirsty nature.

The biggest beneficiaries of this $2.2 billion distribution are the "discounted creditors" who were active off-exchange between 2023 and 2024.

Back in 2023, the market was in a deep bear market, and the prospects for FTX's restructuring were uncertain. A large number of retail and small-to-medium-sized institutional creditors faced extreme liquidity shortages and were forced to sell their claims at a discount on the secondary market. At that time, Wall Street hedge funds, family offices, and specialized distressed asset investment funds acquired these claims on a large scale at extremely low prices of 30 to 40 cents per dollar (i.e., 30%-40% of face value).

This forms a classic "bankruptcy arbitrage" chain:

TradFi institutions bought $1 worth of debt at a cost of 30 cents at the bottom of extreme pessimism. As FTX replenished its fiat currency reserves by selling off its holdings of crypto assets (such as massive amounts of SOL) and as the market recovered, the restructuring plan was finalized with a 100% to 120% USD-denominated payout ratio. This means that those distressed asset buyers who had been lurking during the downturn achieved an absolute USD return of 200% to 300% in just over two years, with no leverage and virtually no risk.

Previously, few people systematically tracked the true identities of these "secondary creditors" and the subsequent destination of their funds. However, this concentrated release of $2.2 billion provides an excellent window for observation. These arbitrage capital groups are essentially fiat-based profit-driven entities, their DNA fundamentally different from that of the native crypto community.

Once this huge profit is realized, the funds will most likely not go back to the cryptocurrency secondary market to buy up Bitcoin or Ethereum at high prices, but will instead flow directly into the TradeFi market, such as to purchase US Treasury bonds (T-bills), high-yield corporate bonds, or invest in the next traditional macro arbitrage target.

The dramatic fluctuations and crashes in the crypto market have essentially created a massive pool of cheap assets. Traditional financial capital, leveraging its size and time tolerance, has profited from this pool at low prices, ultimately permanently withdrawing the enormous fiat currency profits from the crypto ecosystem. This is not merely a change of hands, but a devastating blow to liquidity.

2.2 Billion Liquidity Test: Cooled-down Return Inflow and Market Pressure Under "Extreme Fear"

In the narratives of retail investors, the $2.2 billion distribution is often interpreted as a "gift from heaven," a massive influx of liquidity into the crypto market. However, professional traders on social media platforms like Twitter have reacted with unusual indifference and even caution. Current market sentiment is extremely tense, with the Fear & Greed Index having plummeted to the "extreme fear" level of 11. Coupled with complex geopolitical pressures, this $2.2 billion may not only fail to fuel a market rescue but could also exacerbate short-term market volatility.

Historical data provides the coldest evidence. Looking back at FTX's first three rounds of creditor distribution, on-chain analysis shows that only about 30% to 40% of the funds flowed back into cryptocurrency exchanges and converted into spot purchasing power within 30 days. This low return rate is due to two main reasons:

Firstly, for those retail investors who stubbornly held on and refused to sell their bonds, the pressure of living expenses and their distrust of centralized exchanges had reached its peak after three and a half years of hardship. Once they received fiat currency through Payoneer or compliant channels, their primary need was to improve liquidity in their real lives, rather than re-betting on high-risk assets amidst extreme market fear. The Chinese crypto community's assessment was particularly pragmatic: "What everyone urgently needs is real-world liquidity; this isn't really a positive development."

Screenshot from KOL (Key Opinion Leader) in the Chinese section of Platform X – Kindergarten Principal