FTX Estate Presents Recovery Proposal with Anticipated 90% Asset Return
The now-defunct FTX cryptocurrency exchange has put forth a proposed resolution plan this week, aiming to address the disputes concerning customer assets lost when the company declared bankruptcy in November 2022.
FTX Creditors Outline the Path to Compensation: 90% Asset Recovery Envisaged in Bankruptcy Scheme
The proposed settlement scheme by FTX debtors includes preferential disbursements to customers and a proposition to diminish potential preference liability, with an expected asset recovery of over 90% for customers globally, pending approval. FTX submitted this settlement plan to the Delaware bankruptcy court, with hopes of obtaining approval by the second quarter of 2024.
This proposed settlement plan categorizes FTX assets into three distinct pools: one designated for FTX.com customers, another for FTX US customers, and a general pool. It assigns customers priority “shortfall claims” against the general pool, estimated to be around $9 billion.
“Taking into consideration both the priority and non-priority segments of the shortfall claim, the FTX Debtors project that, if the Amended Plan is sanctioned, customers of FTX.com and FTX US would collectively recover over 90% of the distributable value worldwide,” as detailed in the announcement.
“Collectively, amidst what has been an exceptionally challenging financial catastrophe, the debtors and their creditors have generated substantial value from a situation that could have potentially resulted in near-total losses for customers,” noted John J. Ray III, the Chief Restructuring Officer and current CEO of FTX.
To resolve possible preference claims, FTX has presented a proposition to customers to reduce payouts based on net withdrawals made within the nine days preceding the bankruptcy filing. This proposal entails customers repaying 15% of the amount by which their withdrawals exceeded their deposits during that timeframe.
For instance, if a customer withdrew $100,000 while only depositing $20,000 within the nine days before the bankruptcy, their net withdrawal would be $80,000. They would then repay 15% of this amount, equaling $12,000, thus reducing their payout. Customers with net withdrawals totaling less than $250,000 will not face any reduction in their payout according to this arrangement. Additionally, certain customers may be exempt from this offer.
It’s crucial to note that the actual recovery percentages remain uncertain and contingent upon various factors such as asset sales, litigation outcomes, and fluctuations in cryptocurrency prices, as emphasized in the announcement. Non-customers are poised to experience more substantial losses compared to exchange users under this arrangement. FTX has characterized this deal as a “significant milestone” resulting from “months of extensive, arms-length negotiations” involving major creditors like the customer committee.
Your insights and viewpoints on the proposed settlement plan by FTX debtors are welcomed in the comments section below.
Frequently Asked Questions (FAQs) about Cryptocurrency Bankruptcy Recovery
What is the main objective of FTX’s proposed settlement plan?
FTX’s proposed settlement plan aims to resolve disputes over customer assets lost during the company’s bankruptcy, with the goal of returning over 90% of assets to customers worldwide if approved.
How does FTX categorize its assets in the proposed settlement plan?
The proposed plan divides FTX assets into three pools: one for FTX.com customers, another for FTX US customers, and a general pool. Customers have priority “shortfall claims” against the general pool.
What is the basis for reducing customer payouts according to the plan?
To address preference claims, FTX offers a deal that reduces payouts based on net withdrawals made within nine days before the bankruptcy filing. Customers are required to repay 15% of the amount their withdrawals exceeded deposits during that period.
Are recovery percentages guaranteed under the proposed plan?
No, the actual recovery percentages are uncertain and depend on factors like asset sales, litigation outcomes, and cryptocurrency price fluctuations, as stated in the announcement.
How does this plan affect non-customers?
Non-customers may face greater losses compared to exchange users under this proposed settlement arrangement.
When does FTX expect to gain approval for the plan?
FTX aims to secure approval for the plan by the second quarter of 2024, pending review by the Delaware bankruptcy court.
More about Cryptocurrency Bankruptcy Recovery
- FTX Official Announcement
- Delaware Bankruptcy Court
- Cryptocurrency Asset Recovery
- FTX Customer Claims
- Cryptocurrency Market Analysis