FTX Introduces Revised Plan to Return Creditor Holdings
Crypto exchange FTX, which went bankrupt in November 2022, has unveiled a revised plan to return over 90% of creditor holdings. The debtors’ group overseeing the bankruptcy process intends to file the proposal with a U.S. Bankruptcy Court by December 16, 2023. According to a statement released on Monday, customers of FTX.com and FTX US would collectively receive more than 90% of the distributable value worldwide if the plan is approved by the end of the second quarter of 2024. The estimated value for FTX.com is $8.9 billion, while for FTX.US it is $166 million.
FTX CEO Describes Proposed Settlement as Milestone
FTX CEO John J. Ray III, who also leads the FTX Debtors, hailed the proposed settlement of customer property issues as a major milestone. He expressed satisfaction with the progress made since the collapse of the exchange and emphasized the creation of significant value from what could have been a complete loss for customers.
Potential Exclusion of Insiders and Affiliates
The revised plan includes a provision that may exclude insiders, affiliates, and customers who had knowledge of commingling and misuse of customer deposits and corporate funds or altered their Know Your Customer (KYC) information to facilitate withdrawals during the exchange’s shutdown. These customers may not receive payouts reflecting the fair value of their claims.
Breaking Down the FTX Proposal
The proposed plan divides missing customer assets into three pools: one for FTX.com customers, one for FTX.US customers, and a “General Pool” for miscellaneous assets. Customers with a preference settlement amount below $250,000 can accept the settlement without any reduction in their claim or payment. Creditors would also receive a “Shortfall Claim” against the general pool, covering the portion of losses not covered by insurance or other agreements.
Anticipated Partial Payments for Customers
The plan states that customers of both exchanges are not expected to be paid in full, with greater percentage losses for customers of FTX.com. The revised plan addresses customer property litigation by providing an unsecured claim with an equitable priority to certain segregated or taken assets at the exchanges.
Hot Take: FTX’s Revised Plan Offers Hope for Creditor Recovery
FTX’s introduction of a revised plan to return over 90% of creditor holdings is a significant step towards resolving the fallout from its collapse. The proposed settlement, if approved, would provide substantial compensation to customers of FTX.com and FTX US. The exclusion of insiders and affiliates involved in wrongdoing demonstrates a commitment to fairness and accountability. While customers may not receive full payments, the revised plan acknowledges their property interests and offers an equitable solution through the Shortfall Claim mechanism. Overall, this proposal represents a positive development in the bankruptcy process, offering hope for creditor recovery and restoring confidence in the crypto industry.
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