FTX Debtors Reach Settlement in Customer Property Disputes
FTX Debtors have announced a significant milestone in their Chapter 11 discussions, stating that they have reached a settlement in customer property disputes. This means that customers of FTX and FTX.US could see over 90% of their assets returned to them by mid-2024.
A Major Milestone Reached
The FTX Debtors released a statement announcing that they have reached a major milestone in their Chapter 11 case after extensive discussions with the unsecured creditors’ committee. This committee represents non-US customers and class action plaintiffs involved in customer property disputes.
The proposed settlement was filed with a Delaware-based US bankruptcy court on October 16 and is seeking court approval by December 16. If approved, the settlement would resolve the customer property litigation and facilitate confirmation of the Amended Plan by the second quarter of 2024.
Customers To Receive Assets
The amended plan includes a shortfall claim where FTX debtors estimate that customers of FTX and FTX.US will collectively receive 90% of the available assets for distribution. The estimated shortfall claim amounts to around $8.9 billion for FTX.com and $166 million for FTX.US. Disbursement of funds to customers is expected in the second quarter of 2024 if approved by the bankruptcy court.
FTX CEO, John J Ray III, expressed satisfaction with the settlement terms, acknowledging that it has created significant value from what could have been a total loss for customers.
The Amended Plan
The amended plan is similar to the draft plan filed by FTX Debtors on July 1, 2023. It involves dividing the assets into three pools: one for FTX.com customers, one for FTX.US customers, and a general pool of other assets.
However, it is anticipated that customers of both exchanges will not be paid in full, with FTX.com experiencing a higher percentage of losses.
Customer Clawbacks
Under the proposed plan, customers who withdrew over $250,000 from the exchange within the first nine days of bankruptcy will see their claims reduced by 15% of the amount. Claims under $250,000 will not be subject to this reduction.
The amended plan also allows FTX to exclude insiders, affiliates, and customers with knowledge of the misuse and comingling of customer deposits and corporate funds from the settlement.
Meanwhile, former FTX CEO Sam Bankman-Fried’s trial related to the collapse of FTX and its associated entities is entering its third week.
Hot Take: FTX Debtors Reach Settlement in Customer Property Disputes
The FTX Debtors have reached a significant milestone in their Chapter 11 discussions by settling customer property disputes. This development brings hope to FTX and FTX.US customers as they could potentially receive over 90% of their assets back by mid-2024. The proposed settlement has been filed with a US bankruptcy court and is awaiting approval. If approved, it would resolve customer property litigation and pave the way for confirmation of the Amended Plan in the second quarter of 2024. However, it’s important to note that not all customers will be paid in full, with FTX.com customers expected to experience higher losses. Additionally, certain customer claims may be subject to reductions based on withdrawal amounts during the initial days of bankruptcy.
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