FTX Creditors to Vote on Liquidation Plan for Customer Repayment
FTX, the defunct cryptocurrency exchange, is moving forward with a crucial step in its bankruptcy proceedings by seeking creditor approval on a liquidation strategy designed to compensate its customers. Delaware judge John Dorsey recently greenlit FTX’s bankruptcy advisors to initiate the voting process among creditors, aimed at gathering opinions on the proposed repayment plan.
According to a report by Bloomberg, FTX intends to offer customers 119% of the value of their assets as of the date when the exchange filed for Chapter 11 protection. Other creditors could potentially receive up to 143% of what they are owed, as outlined in court documents.
Despite objections from a few customers who argued for higher payouts in light of recent cryptocurrency market spikes, FTX’s legal counsel Andy Dietderich emphasized that bankruptcy laws necessitate valuing claims based on the exchange’s financial status at the time of its collapse, regardless of subsequent market fluctuations.
“The estimated costs to unwind the FTX estates could amount to hundreds of millions of dollars,” Dietderich commented.
This latest development marks a significant milestone in the resolution of FTX’s prolonged two-year saga of financial turmoil.
Furthermore, FTX is currently negotiating with federal authorities to leverage government claims against the firm to offset customer losses. The company had previously settled a substantial $24 billion tax claim with the US Internal Revenue Service in December 2023.
However, not all customers are satisfied with FTX’s pledge to fully reimburse their claims with interest. Some argue that the exchange’s valuation of their holdings, based on November 2022 cryptocurrency prices, misleads them into believing they will achieve complete recovery, as reported by Reuters.
John Ray, FTX’s current CEO who assumed leadership following the ousting of Sam Bankman-Fried, countered that simply returning the cryptocurrencies customers deposited is unfeasible, asserting that those assets were stolen by Bankman-Fried, who is currently facing severe legal consequences.
Ray emphasized that refunding customers in cash aligns better with the volatile nature of the crypto assets they once held, whose values have fluctuated significantly since the exchange’s collapse.
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