On March 31, 2026, FTX Recovery Trust (FTX Recovery Trust Fund) officially launched the fourth round of creditor distribution totaling approximately US$2.2 billion. As funds are gradually deposited into accounts within 1 to 3 working days through channels such as BitGo, Kraken and Payoneer, the most famous bankruptcy case in crypto history seems to be heading towards a seemingly happy ending.

On the surface, this is a victory for Web3 infrastructure. Compared with the long liquidation period of Lehman Brothers, which took 14 years, and Enron, which took 11 years, FTX achieved an astonishingly high recovery rate in just over three years - U.S. customers (Class 5B) achieved a cumulative 100% full recovery, convenience class creditors (Convenience Class) even reached 120% of excess compensation, and Class 5A also reached about 96%. The transparency, traceability and extremely high realization efficiency of assets on the chain make bankruptcy and liquidation much faster than the traditional financial system.

However, behind the gorgeous data of "120% excess compensation", it conceals an extremely cruel invisible wealth transfer in the cryptocurrency market. When we penetrate the flow of funds of US$2.2 billion, we will find that the biggest beneficiaries of this round of distribution are no longer the native FTX users who cried in despair in November 2022, but traditional financial distressed asset funds that are well versed in the laws of cycles. The crypto crash may be invisibly completing an epic "blood transfusion" for traditional finance.

To understand the nature of this wealth transfer, we first need to clarify the valuation basis of the bankruptcy court. In FTX’s liquidation framework, all compensation payments are strictly anchored to the cryptocurrency fiat currency standard price when FTX files for bankruptcy in November 2022.

This is a price snapshot of an extreme bottom!

At that time, Bitcoin’s price was only $16,871. This means that if a user held 10 BTC before the collapse of FTX, his legal claim size was locked in at approximately $168,710. Today, when he receives an "excess compensation" of 100% or even 120%, the absolute amount he gets back is approximately US$168,000 to US$200,000. But in the real market at the end of March 2026, the market value of 10 BTC was as high as approximately US$670,000.

What the original crypto asset holders got back was the "crash price USD", not the appreciation income of the asset itself. The huge price difference (more than $400,000 in shortfall costs) is actually the "hidden shortfall tax" paid by the original creditor in order to obtain legal currency liquidity. The bankruptcy reorganization process legally protects the integrity of the U.S. dollar standard, but in fact deprives native crypto users of the Beta benefits they deserve in the subsequent three-year cycle recovery. This seemingly fair statutory full compensation is tantamount to the second systematic plunder for investors who believe in cryptography.

If the failure of original users is the helplessness of the bankruptcy law, then the prosperity of the secondary claims market is the ultimate expression of the bloodthirsty nature of capital.

The biggest beneficiary group of this US$2.2 billion distribution is the "discount creditors" who will be active on the sidelines from 2023 to 2024.

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

This forms a classic "bankruptcy arbitrage" chain:

At the bottom of extremely pessimistic sentiment, the TradFi institution bought $1 of debt at a cost of 30 cents. As FTX sold off its holdings of crypto assets (such as massive amounts of SOL, etc.) and enriched its fiat currency treasury as the market recovered, the restructuring plan finally finalized a US dollar-based loss ratio of 100% to 120%. This means that those buyers of distressed assets who lurked during the trough period have achieved an unlevered, nearly risk-free absolute return of 200% to 300% in U.S. dollars in just over two years.

In the past, few people systematically tracked the true identities and subsequent whereabouts of these "secondary creditors". But this concentrated release of US$2.2 billion provides an excellent observation window. The essence of this group of arbitrage capital is legal currency-based profit drivers, and their genes are completely different from the native crypto community.

When this huge profit is realized, the destination of these funds will most likely not be to return to the cryptocurrency secondary market to pick up high-priced Bitcoin or Ethereum, but to flow directly to the TradFi market, such as purchasing U.S. Treasury bonds (T-bills), high-yield corporate bonds, or investing in the next traditional macro arbitrage target.

The violent fluctuations and collapse of the crypto market have essentially created a huge pool of cheap assets; traditional financial capital has taken advantage of its capital volume and time tolerance to complete low-level harvesting in this pool, and ultimately removed the huge legal currency profits permanently from the crypto ecosystem. This is not just a change of hands, but also a dimensionality reduction blow at the liquidity level.

2.2 billion liquidity test: cold return and market pressure under “extreme fear”

In the narrative of retail investors, the distribution of US$2.2 billion is often interpreted as "rain from heaven", a huge amount of liquidity that is about to be injected into the crypto market. However, the response from professional traders on social media such as Twitter has been unusually cold and even wary. The current market sentiment is extremely tight. The Fear & Greed (Fear and Greed) Index has dropped to the "extreme fear" freezing point of 11. Added to the complex geopolitical pressure, the US$2.2 billion may not be the fuel to rescue the market, but may intensify the short-term volatility of the market.

Historical data provides the coldest evidence. Looking back at FTX’s first three rounds of creditor distributions, on-chain analysis shows that only about 30% to 40% of the funds will flow back into the cryptocurrency trading platform within 30 days and be converted into spot purchasing power. This sluggish return rate is doomed by two reasons:

First, for those original retail investors who have held on to the end without selling their debt, after three and a half years of torture, the pressure of living expenses and distrust of centralized exchanges have reached their peak. After they get the legal currency sent through Payoneer or compliance channels, their primary demand is to improve liquidity in real life, rather than re-betting on high-risk assets at a time when market sentiment is "extremely fearful". The evaluation of the Chinese encryption community is particularly pragmatic: "What everyone urgently needs is real-world liquidity, which is not a good thing."

Secondly, as mentioned above, the investment orders (Mandate) of debt acquisition institutions that account for a large proportion of the secondary market are not to do long cryptocurrency. For this part of the funds, the distribution day of US$2.2 billion is their “clearance and withdrawal day”.

Therefore, the argument that "$200 million in fresh capital (assuming only 10% is reinvested and bought) encounters the biggest fear" is very likely to evolve into a short-term correction catalyst. Not only did the market not receive the expected incremental funding support, but it also had to endure the liquidity vacuum caused by the complete withdrawal of some profit-seekers from the market.

FTX’s fourth round of distribution leaves crypto-finance practitioners with a question worth pondering: In a decentralized network that is highly transparent but lacks barriers, how can native wealth accumulation resist systematic arbitrage by huge external capital at the bottom of the cycle?

When retail investors are forced to hand over bloody chips in the long bear market, and what is ultimately nourished is Wall Street's balance sheet, the so-called "financial democratization" of cryptocurrency may need to undergo a longer evolution and reconstruction.