FTX Debtors Accuse Creditor Panel of Power Grab in Bankruptcy Estate

FTX debtors are accusing a creditor panel of disregarding other stakeholders in the bankruptcy estate and making a power grab. They refute claims that creditors were not consulted on maximizing returns from FTX assets. FTX lawyers argue that hidden agendas are driving the protest against the firm’s restart, highlighting that creditors previously opposed selling FTX assets at a discount.

FTX Concerned Over Lack of Creditor Transparency

FTX expresses concern about the lack of transparency from creditors. The estate would need court permission to invest assets in Treasuries for higher returns, but long-term treasuries can make assets illiquid. FTX also raises the issue of preventing unfair profits for market makers and traders from token sales.

FTX’s Dispute with Creditors and Restructuring Plan

FTX’s conflict with creditors started when it submitted a restructuring plan in July. The plan aims to meet creditor demands through business operations rather than full asset liquidation. FTX believes that creditors’ invisibility has hindered the company’s restructuring efforts.

Winding Up of Bankruptcy Estate Prioritizes Secured Creditors

Under the US bankruptcy code, preferred creditors have priority in liquidation proceedings. Government agencies like the IRS can legally claim priority over secured and unsecured creditors. The IRS has already filed papers to secure its share of FTX assets before other creditors.

FTX’s Claim Downgrading in BlockFi Bankruptcy

FTX protested the downgrading of its claims in the BlockFi bankruptcy, arguing that it was unfairly included in a rushed liquidation plan. FTX believes that important legal questions will only be clarified during the trial in October.

Hot Take

FTX’s ongoing dispute with creditors underscores the complexity and challenges of bankruptcy proceedings. The accusations of a power grab and lack of transparency highlight the need for open communication and fair decision-making to maximize returns for all stakeholders. The prioritization of secured creditors and the downgrading of FTX’s claims further complicate the resolution process. Ultimately, a balanced and equitable approach is necessary to ensure a fair outcome in the FTX bankruptcy.