FTX Revises Chapter 11 Bankruptcy Plan with Retroactive Crypto Claims
FTX, the fallen crypto exchange, has made changes to its Chapter 11 bankruptcy plan. The amended plan states that customers’ claims for crypto will be retroactively set to the time when the exchange collapsed.
Details of the Amended Bankruptcy Plan
Debtors for FTX, led by CEO John Ray III and Sullivan & Cromwell lawyers, have revised the exchange’s Chapter 11 reorganization plan. Customer claims seeking compensation will be based on the value at the time of FTX’s bankruptcy filing in November 2022.
Valuing Crypto Claims Based on Collapse Date
The amended plan specifies that claimants’ digital assets will be valued at the time FTX filed for bankruptcy. However, since the filing, crypto prices have significantly increased, potentially causing huge losses for creditors if the plan is approved.
Controversy over the Amended Plan
One FTX creditor, Sunil Kavuri, argues that the plan contradicts the exchange’s Terms of Service. Kavuri believes that ownership of digital assets belongs to customers, not the exchange.
Voting by Certain Creditors on Amendments
According to the filing, specific classes of creditors will have the opportunity to vote on the revised plan. The debtors claim that these amendments are intended to create the most equitable outcome for all involved parties.
Additional Setbacks and Delays
In addition to the amendments, FTX victims face the possibility of an IRS claim for $24 billion in back taxes, which could further reduce their recovery. FTX has objected to the IRS’s claim and demanded substantiation for it.
Hot Take: FTX Bankruptcy Plan Raises Concerns for Customers and Creditors
FTX’s revised Chapter 11 bankruptcy plan, retroactively setting crypto claims to the collapse date, presents challenges for customers and creditors. While it aims to compensate claimants, the substantial rise in crypto prices since the filing may lead to significant losses. Some creditors dispute the plan, arguing that customers, not the exchange, should hold ownership rights. Additionally, the potential IRS claim of $24 billion further complicates the situation. As FTX faces setbacks and delays, the search for an equitable outcome continues for all parties involved.
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