FTX Creditors Object to Bankruptcy Reorganization Claiming It Is Not in Debtors Best Interests

FTX Creditors Challenge Bankruptcy Reorganization Plan, Claim It Is Not in Their Best Interests
Creditors of FTX have lodged a formal objection on June 5 against the proposed repayment plan of the crypto exchange’s bankruptcy estate, arguing that it does not serve their best interests.
The objection highlights several concerns raised by FTX creditors regarding the estate’s plan, including the potential tax implications of receiving money instead of digital assets, which could result in a taxable event.
Critics of the plan argue that distributing assets in kind would be a more favorable option for customers, instead of subjecting them to additional tax burdens as proposed by the debtors.
Furthermore, creditors dispute the valuation of assets assigned to their claims under the FTX plan and question the authority of the John J. Ray III-led estate to distribute customer assets.
The objection also references various public records and legal proceedings, suggesting that the debtors may be attempting to distribute stolen digital assets, contrary to the interests of creditors.
Amidst these disputes, concerns have been raised about the mounting legal fees associated with the bankruptcy estate, with Ray reportedly earning a substantial hourly rate for his role in managing FTX’s bankruptcy proceedings.
While FTX’s estate has announced plans to repay 118% of allowed claims to 98% of its customers, some creditors argue that the valuation of assets based on their value at the time of the exchange’s bankruptcy filing is flawed and fails to account for potential gains that would have been realized had the exchange not collapsed.
FTX creditors maintain that offering customers a 129% recovery of the value of their cryptocurrency accounts at the time of the petition date does not equate to a full economic recovery, as touted by the debtors.
In response to the objections raised by creditors, FTX has filed a complaint against certain creditors, alleging that their actions are hindering the timely completion of the bankruptcy estate. The ongoing legal battle underscores the complexity and challenges surrounding the restructuring of FTX’s financial affairs.