FTX’s Road to Redemption: New Plan Aims to Return 90% of Creditor Funds Amidst Bankruptcy Controversy
Bankrupt crypto exchange FTX has introduced a revised proposal to return as much as 90% of funds to creditors, a significant move since its insolvency last year.
Following alarming revelations by CoinDesk about FTX’s balance sheet, the exchange found itself in a financial tailspin. Newly appointed CEO John J. Ray III has been openly critical of the financial management practices at FTX. Meanwhile, the company’s founder, Sam Bankman-Fried, is currently facing legal challenges on criminal grounds.
Details of FTX’s Revised Bankruptcy Proposal
A committee of debtors, currently handling the bankruptcy proceedings, has plans to submit the proposal to a U.S. Bankruptcy Court for evaluation by December 16, 2023.
According to the new plan, the missing customer funds would be classified into three distinct categories:
- Assets specifically set aside for FTX.com clientele.
- Assets earmarked for FTX.US users.
- A “General Pool” which encompasses other assets.
The proposal offers customers with a preference settlement amount below $250,000 the chance to accept the settlement without facing any deductions from their claims or payments. Notably, the preference settlement is calculated as 15% of customer withdrawals made on the platform just nine days before its downfall.
An additional “Shortfall Claim” will be given to creditors, representing the approximate value of assets that are absent from their exchange. These values are speculated to be close to $9 billion for FTX.com and a separate $166 million for FTX.US.
Nonetheless, the process of fund recovery might encounter hurdles, including taxes, government-related claims, and unpredictable token price changes.
Another significant aspect of the proposal is the potential exclusion of certain individuals or entities from the settlement. This includes any “insiders, affiliates, or customers” suspected of having knowledge about the mismanagement and misuse of client deposits and corporate resources.
This also pertains to those who may have altered their KYC data to enable withdrawals during the cessation period. The compensation for these individuals may not accurately represent the genuine value of the FTX Debtors’ claims.