FTX Creditors Set for $9B Disbursement by Mid-2024
The bankrupt crypto exchange FTX unveiled a revised plan to return over 90% of creditors’ claims. A recent pronouncement by the chief restructuring executive John Ray III lauded the milestone, admitting the difficulty of overcoming the collapse. The restructuring veteran labeled FTX’s collapse as the most complex financial disaster he ever confronted.
FTX Restructuring Yields Revised Proposal to Return $9B
In a Monday, October 16 statement, the chief restructuring executive expressed optimism in the achievements realized by FTX since its November 2022 implosion. The chief executive restated that the debtors’ group intends to formally file the revised proposal with the Bankruptcy Court by mid-December 2023.
FTX intends to return over 90% of creditor holdings held before the November 2022 collapse. The FTX Debtors approximate that clients from FTX US and FTX.com will collectively receive 90% of the aggregate distributable value, translating to $9 billion.
The statement indicated that the debtors’ group awaits approval from the Bankruptcy Court for the distribution to occur by the second quarter of 2024. The statement approximated FTX.com obligations as $8.9 billion and $166 million for the FTX.US.
FTX Creditors and Debtors Salvage Near Total Loss Situation
FTX’s chief executive commented positively on the proposed settlement involving customer property issues. The executive indicated that creditors and debtors created enormous value to salvage the situation that would easily become a near-total loss for the clients.
The statement detailed the plan as harbouring the intention to exclude clients, insiders and affiliates privy to the commingling customer deposits and misuse of corporate funds. Also, the statement revealed plans to exclude parties that altered the know your customer (KYC) details to facilitate withdrawals following the suspension of operations by the crypto exchange.
The proposal indicates that the payouts to the clients may fail to reflect the fair value of the debtors’ claims.
Details of FTX Proposal to Settle Claims
The proposal plan outlines a three-tier classification of missing customer assets. The circumstances at the onset of Chapter 11 cases determine the classification. The tiers include assets identified for FTX.com clients, FTX.US customers’ assets and a general pool comprising miscellaneous assets.
The plan captures a preference settlement for customers claiming less than $250,000. The pool would receive the settlement without bearing a reduction on the payment. The second pool comprises clients who withdrew $250,000 nine days before the November collapse and would have their claim deducted 15%.
Creditors would benefit from the Shortfall Claim being the portion for the losses excluded from the insurance policy and contractual agreements entered against the general pool. The Shortfall Claim corresponds to the approximated value of missing assets at the FTX exchange.
Nonetheless, the FTX debtors anticipate that clients from the exchanges would accept the partial settlement of those from FTX.com set to bear greater percentage losses.
The debtor’s group explained that the recovery plan is based upon the awareness that the customer property litigation identified FTX.com and FTX.US clients as claiming property interests in certain assets. The interest distinguished the pool from the unsecured claim ranked equally with the general creditors.
The shortfall settlement targets resolving the dispute via offering customers claims against the FTX Debtors, though unsecured, would have equitable priority to specific property separated or withdrawn from the exchanges.
Editorial credit: Sergei Elagin / Shutterstock.com
