FTX Liquidation Plan Moves Forward

Failed crypto exchange FTX seeks creditor votes on a liquidation plan to wind down payments and compensate customers.

Delaware judge John Dorsey authorized FTX bankruptcy advisors to begin soliciting creditor votes on Thursday. The aim is to obtain feedback from those who need to be more involved in the repayment plan.

Per Bloomberg, FTX would likely offer customers 119% of their assets as of the day FTX filed for Chapter 11. Court documents revealed that other creditors could receive up to 143% of their owed assets. The court approval comes over the objections of a few customers demanding higher repayments, given the recent crypto price spike.

Legal and Financial Hurdles

According to FTX lawyer Andy Dietderich, bankruptcy law requires FTX to value claims at the time of FTX's failure despite market prices having surged since then. "We estimate that it would cost hundreds of millions of dollars to disentangle the FTX estates," Dietderich said.

The approval represents a significant milestone in winding down the two-year-long FTX saga. Additionally, FTX is in talks with federal authorities to utilize government claims against the firm to repay customer losses. The company has already settled a $24 billion tax claim from the US Internal Revenue Service in December 2023.

Customer Opposition and Concerns

The beleaguered exchange said it would repay all customer claims with interest. However, some FTX customers oppose the promise, stating the company's claims are based on crypto prices from November 2022.

As a result, they argued that the company's proposed voting plan is meant to mislead customers by "breathlessly touting what they claim to be a full recovery with interest," a Reuters report noted.

John Ray, the current CEO of FTX, who took charge after Sam Bankman-Fried was ousted, told the publication that FTX would not simply repay the cryptos that customers deposited. He added that those funds were long gone and stolen by Bankman-Fried, who is facing 25 years in prison.

"Repaying customers in cash would be more appropriate, given the types of crypto assets that they held," Ray noted. The values have fluctuated dramatically since the company went bankrupt, he emphasized.