The FTX Debtors File Amended Chapter 11 Plan of Reorganization
The FTX Debtors estate, led by CEO John Ray III and the lawyers of Sullivan & Cromwell, has submitted an amended Chapter 11 plan of reorganization, outlining how bankruptcy claims will be handled in the case.
Valuation of Digital Assets in Cash
The plan includes a provision that values claimants’ digital assets in cash based on the date of the bankruptcy filing, November 11, 2022.
Potential Losses for Creditors
If approved, creditors could potentially lose out on significant gains as the market has recovered since FTX’s collapse. The global crypto market cap has increased from around $856 billion to $1.6 trillion, and even FTX’s token has nearly doubled in value.
Disagreements with Terms of Service
Sunil Kavuri, an FTX creditor, argues that the reorganization plan contradicts FTX’s Terms of Service. Kavuri claims that FTX customers owned the digital assets and not the exchange itself.
Voting and Compromises
Creditors from specific classes will have the opportunity to vote on the amended reorganization plan. The plan clarifies the thresholds required for approval. The Debtors emphasize that the plan reflects compromises made to achieve an equitable outcome for all parties involved.
Possible “Cram-Down” Scenario
In certain circumstances called a “cram-down,” non-agreeing creditors can still be compelled to accept the plan if it is deemed fair and equitable.
No Immediate Response from FTX
FTX did not immediately respond to a request for comment from The Block.
Hot Take: The Future of FTX’s Bankruptcy Claims
The amended Chapter 11 plan of reorganization filed by the FTX Debtors estate presents a crucial turning point in the resolution of the bankruptcy claims. The valuation of digital assets in cash at the time of the filing and potential losses for creditors are significant factors to consider. However, disagreements regarding ownership and compromises made in creating an equitable outcome have added complexity to the situation. It remains to be seen how the voting process will unfold and whether a “cram-down” scenario may come into play. The response from FTX will also play a pivotal role in shaping the future of this bankruptcy case.
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