FTX Debtors Propose Settlement Plan to Resolve Customer Disputes
The now-defunct FTX crypto exchange has put forth a proposed settlement plan to address the issue of customer assets lost during its bankruptcy filing in November 2022. The plan, which has been filed in Delaware bankruptcy court, aims to secure approval by the second quarter of 2024.
Priority Payouts and Asset Recovery for Customers
The proposed settlement divides FTX assets into three pools: one for FTX.com customers, one for FTX US customers, and a general pool. It offers customers priority “shortfall claims” against the general pool, with an estimated value of $9 billion. If approved, customers are expected to recover over 90% of their assets worldwide.
Reducing Potential Preference Liability
To address potential preference claims, FTX has made an offer to customers to reduce payouts based on net withdrawals made in the nine days before the bankruptcy filing. Customers would need to pay back 15% of the amount their withdrawals exceeded deposits during that period. Customers with net withdrawals under $250,000 are exempt from this reduction.
Uncertainty and Non-Customer Losses
The actual recovery percentages for customers remain uncertain and depend on various factors such as asset sales, litigation outcomes, and cryptocurrency price fluctuations. The announcement emphasizes that non-customers may face greater losses compared to exchange users. FTX describes the proposed settlement as a significant achievement resulting from extensive negotiations with major creditors.
Hot Take: FTX Aims for Fair Resolution with Proposed Settlement Plan
FTX’s proposed settlement plan offers hope for customers who lost assets during the exchange’s bankruptcy. With priority payouts and the potential recovery of over 90% of assets worldwide, this plan aims to provide a fair resolution. The offer to reduce potential preference liability further demonstrates FTX’s commitment to addressing customer concerns. However, the recovery percentages are subject to various factors, and non-customers may experience greater losses. Overall, this proposed settlement is a positive step towards resolving the disputes and creating value from a challenging situation.
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