FTX Bankruptcy Plan Approved, Promising 119% Return to Creditors

The US
bankruptcy judge Jon Dorsey has approved the reorganization plan for FTX,
paving the way for the defunct cryptocurrency exchange to repay billions of
dollars to its creditors. The decision marks a significant update in the
company’s efforts to wind down operations and compensate affected customers.

FTX Bankruptcy Plan
Approved, Creditors Set to Receive Full Repayment

Under the approved
plan, 98% of FTX creditors are slated to receive approximately 119% of
their allowed claims within 60 days of the plan’s effective date. The company
projects that between $14.7 billion and $16.5 billion will be available for
distribution, a sum that includes assets recovered from various sources
worldwide.

“We
are poised to return 100% of bankruptcy claim amounts plus interest for
non-governmental creditors through what will be the largest and most complex
bankruptcy estate asset distribution in history,” John J. Ray III, FTX’s
Chief Executive Officer and Chief Restructuring Officer, commented.

“In
preparation for this process, we are finalizing agreements to retain
specialized agents to assist us in getting recoveries to customers around the
world as safely and expeditiously as possible.”

The FTX Debtors today announced that the United States Bankruptcy Court for the District of Delaware has confirmed FTX’s Plan of Reorganization. Read about it here: https://t.co/kETV0rgs0v

— FTX (@FTX_Official) October 7, 2024

The plan’s
approval comes less
than two years after FTX’s high-profile collapse in November 2022, which
sent shockwaves through the cryptocurrency industry. Since then, a team of
professionals has worked to rebuild FTX’s financial records and recover assets
globally.

US Bankruptcy
Judge Dorsey, who presided over the case, praised the reorganization effort as
“a model case for how to deal with a very complex Chapter 11 bankruptcy
proceeding.”

The
distribution process is expected to be intricate, involving creditors across
more than 200 jurisdictions. While the
plan promises full repayment, some customers may still feel the sting of missed
opportunities. Since FTX’s bankruptcy filing, cryptocurrency prices have
rebounded significantly, with Bitcoin surging approximately 260%.

The FTX
bankruptcy case has been closely watched by the crypto industry and financial
regulators alike. It follows the criminal conviction of FTX founder Sam
Bankman-Fried, who was sentenced to 25 years in prison for fraud earlier this
year.

In response
to the latest news, the price of Bitcoin fell by more than 4% on Monday, but it
still remains clearly above the psychological threshold of $60,000. On Tuesday,
one BTC is priced at $62,430.

Sam Bankman-Fried, SEC and
CFTC

Amid the
ongoing efforts to repay creditors of the bankrupt FTX, the case of its former
chief and founder, Sam Bankman-Fried (SBF), who is currently incarcerated with
a 25-year prison sentence, continues to unfold. Last month, he formally
appealed his conviction and sought a retrial. In a 102-page appeal document,
SBF’s legal team accused Judge Lewis Kaplan of exhibiting unfair bias during
the trial.

Shapiro has
stepped in as Bankman-Fried’s new legal counsel, replacing trial attorneys Mark
Cohen and Christian Everdell post-conviction. In their recent submission, the
defense argued that Judge Kaplan had unjustly prevented Bankman-Fried from
informing the jury that FTX customers might recover their funds through
bankruptcy proceedings.

Meanwhile,
the FTX bankruptcy case has seen a significant development, with the United
States Commodities Futures Trading Commission (CFTC) agreeing to a $12.7
billion settlement to resolve a 19-month lawsuit. The settlement, finalized
after extensive negotiations, includes $8.7 billion in restitution and $4
billion in disgorgement. In this context, the CFTC opted not to pursue a civil
monetary penalty. FTX has acknowledged its substantial potential liabilities to
the CFTC due to the actions and convictions of FTX insiders, highlighting the
commodities regulator as a major creditor in the Chapter 11 proceedings.

Additionally,
last month the Securities and Exchange Commission (SEC) expressed concerns over
FTX’s proposed payment plan to creditors, particularly the use of stablecoins.
The SEC filed a motion stating it does not provide an opinion on the legality
of the transactions detailed in the plan under federal securities laws but
reserves the right to challenge any transactions involving crypto assets.

This article was written by Damian Chmiel at www.financemagnates.com.
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