Proposed Settlement in Bankruptcy Case Raises Hope for Over 90% Asset Return to FTX Customers
In a significant development, creditors of the defunct crypto exchanges FTX and FTX.US may witness the return of more than 90% of their assets by the second quarter of 2024. This positive outcome results from a proposed settlement that has been reached between FTX creditors and debtors.
On October 17, FTX debtors announced a “major milestone” in their Chapter 11 bankruptcy case after extensive discussions with the unsecured creditors’ committee, a committee representing non-United States customers, and class action plaintiffs concerning customer property disputes.
While FTX debtors filed a notice of the proposed settlement with a U.S. bankruptcy court in Delaware on October 16, they are required to make an official filing by December 16 to seek the court’s approval.
A pivotal aspect of the amended plan centres on the “shortfall claim,” wherein FTX debtors estimate that customers of both FTX.com and FTX.US would collectively receive 90% of the assets available for distribution. The estimated shortfall claim amounts to approximately $8.9 billion for FTX.com and $166 million for FTX.US.
Assuming approval by the bankruptcy court, FTX anticipates disbursing these funds by the conclusion of the second quarter of 2024.
John J. Ray III, CEO and Chief Restructuring Officer of FTX, expressed his satisfaction with the settlement terms, highlighting the immense value created by the debtors and creditors from what could have been a near-total loss for customers amid a financial crisis.
The amended plan introduces a division of assets into three pools, segregating assets for the benefit of FTX.com customers, U.S. customers, and a general pool of other assets. It’s important to note that only the first two groups are included in the shortfall claim, with FTX debtors acknowledging that customers of both exchanges are unlikely to be paid in full. It’s also expected that FTX.com customers may experience a greater percentage of losses.
An interesting facet of the proposed plan pertains to customers who withdrew over $250,000 from the exchange within nine days of the bankruptcy. Such customers may see their claims reduced by 15% of the withdrawn amount.
However, claims under $250,000 would remain unaffected by this reduction, as clarified by FTX debtors. Eligible customers with a preference settlement amount under $250,000 during the nine-day period would be able to accept the settlement without any reduction in their claim or payment.
In the context of the amended plan, FTX may opt to exclude insiders, affiliates, and customers who were potentially aware of the commingling and misuse of customer deposits and corporate funds from the settlement.
Notably, former FTX CEO Sam Bankman-Fried is currently in the midst of a fraud trial, which began two weeks ago, related to his involvement in FTX’s collapse into bankruptcy in November of the previous year.
Disclaimer: Please note that the information provided in this article is for informational purposes only and should not be considered financial advice. Cryptocurrency investments inherently involve risks, and individuals are encouraged to conduct thorough research and seek guidance from financial experts before making investment decisions.
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