Good News for Bankrupt FTX Customers: Customer Shortfall Settlement Proposed
FTX Trading Ltd. and its affiliated debtors have unveiled a landmark proposal known as the “Customer Shortfall Settlement” as part of their ongoing Chapter 11 proceedings. This proposal, set to be integrated into an Amended Plan of Reorganization, aims to conclude the proceedings by mid-2024. The FTX Debtors estimate that if the plan is approved, customers of FTX and FTX US would receive over 90% of distributable value worldwide by the end of the second quarter of 2024.
In an Attempt to Ease Customer Property Disputes
The Customer Shortfall Settlement aims to resolve customer property disputes related to FTX.com and FTX US. It offers customers an unsecured claim with an equitable priority to certain segregated or retrieved assets, providing a solution to a complex legal impasse.
A Symphony of Negotiations
The Customer Shortfall Settlement is the result of extensive negotiations between various parties involved, including the FTX Debtors, the Ad Hoc Committee of Non-U.S. Customers, the Official Committee of Unsecured Creditors, and class representatives. These negotiations were guided by an independent Board of Directors and aimed to add significant value to the case.
A Whooping $9B Amended Plan
The amended plan categorizes assets into three pools based on their status at the start of the Chapter 11 cases. Customers of FTX.com and FTX US will have Shortfall Claims against General Pool assets, estimated at $8.9 billion and $166 million respectively. Although unsecured, these claims will have an equitable priority, ensuring that customers receive over 90% of distributable value worldwide once the plan is approved. However, the plan does not include any insiders, affiliates, or consumers who were aware of the mixing and misuse of customer deposits and corporate cash.
How Do the Preference Settlements Work?
The Customer Shortfall Settlement also addresses preference exposure linked to eligible customers’ claims. However, this offer is subject to approval by the Bankruptcy Court and may be adjusted by the FTX Debtors. Customers eligible for a preference settlement of less than $250,000 can accept the settlement without any reduction in their claim or payment.
Hot Take: A Milestone for FTX Customers
The proposed Customer Shortfall Settlement represents a significant milestone in the bankruptcy proceedings of FTX Trading Ltd. and its affiliated debtors. If approved, it would provide customers with a substantial portion of the distributable value worldwide, offering hope for a positive resolution to their claims. The innovative nature of this settlement demonstrates the commitment of all parties involved to finding a fair and equitable solution. Overall, this development brings optimism for a swift conclusion to the Chapter 11 proceedings and a brighter future for FTX customers.
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