FTX Customers Could See Over 90% of Assets Returned in Proposed Settlement
The customers of bankrupt crypto exchanges FTX and FTX.US may have the opportunity to recover more than 90% of their assets by the second quarter of 2024, thanks to a proposed settlement between FTX creditors and debtors. The debtors announced on October 17 that they had reached a significant milestone in their Chapter 11 case after extensive discussions with various parties regarding customer property disputes.
The proposed settlement was filed with a U.S. bankruptcy court in Delaware on October 16, but an official filing seeking court approval is still required by December 16. If approved, the settlement would result in the distribution of approximately $8.9 billion for FTX.com customers and $166 million for FTX.US customers by the end of Q2 2024.
Amended Plan Includes Shortfall Claim
The amended plan includes a “shortfall claim,” which estimates that customers of both FTX.com and FTX.US will collectively receive 90% of the available assets. This translates to approximately $8.9 billion for FTX.com and $166 million for FTX.US. The funds are expected to be disbursed if the bankruptcy court approves the settlement.
John J. Ray III, CEO and chief restructuring officer of FTX, expressed satisfaction with the terms of the settlement, stating that it created significant value for customers despite the challenging financial disaster they faced.
Assets Divided into Three Pools
The amended plan involves dividing the assets into three pools: assets for FTX.com customers, assets for U.S. customers, and a general pool of other assets. However, only the first two groups are included in the shortfall claim. It is anticipated that both sets of customers will not be paid in full, with FTX.com likely experiencing a higher percentage of losses.
FTX Customer Clawbacks
Under the proposed plan, customers who withdrew over $250,000 from the exchange within nine days of bankruptcy would have their claims reduced by 15% of the amount. However, claims under $250,000 would not be subject to a reduction. The settlement may also exclude insiders, affiliates, and customers who were aware of the misuse of customer deposits and corporate funds.
Former FTX CEO Sam Bankman-Fried is currently facing a fraud trial related to his involvement in FTX’s collapse into bankruptcy in November.
Hot Take: FTX Customers Could Recover Majority of Assets in Proposed Settlement
The proposed settlement between FTX creditors and debtors could result in FTX.com and FTX.US customers recovering over 90% of their assets. This is a significant development in the Chapter 11 case and reflects extensive discussions with various parties regarding customer property disputes. If approved by the bankruptcy court, the settlement would distribute approximately $8.9 billion for FTX.com customers and $166 million for FTX.US customers by Q2 2024. While some clawbacks may occur for certain customers, this settlement offers hope for many affected individuals. It remains to be seen how the court will respond to the official filing seeking approval.
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