Creditors Set to Receive 119% Repayment as Delaware Judge Approves FTX Estate’s Bankruptcy Plan
A U.S. bankruptcy court has granted historic approval to FTX's reorganization plan, which will pay creditors of the now-defunct
A U.S. bankruptcy court has granted historic approval to FTX’s reorganization plan. The plan will pay creditors of the now-defunct cryptocurrency exchange around 119% of the losses they allege they suffered after FTX’s collapse in November 2022.
Customers of FTX, who were left in disarray following the exchange’s bankruptcy filing nearly two years ago, have won a major victory thanks to the ruling made by Judge John T. Dorsey of the U.S. Bankruptcy Court for the District of Delaware.
An outline of the plan
The September-filed and overwhelmingly endorsed proposal by FTX’s creditors (98 percent in terms of amount and 96% in terms of headcount) was allowed by the court and lays out a strategy to reimburse customers of the exchange for a significant sum of money. In the event that FTX files for bankruptcy, customers will get cash payments equal to an estimate of 119% of the account values, with some creditors possibly earning as much as 140%.
Despite opposition from multiple creditors, the payback will take place in the form of cash instead of in-kind payouts of cryptocurrencies. Although several consumers contended that they should be paid back in digital assets rather than cash, the court rejected these claims. The little amount of cryptocurrency that the estate still owns, according to FTX’s legal team, led by Sullivan & Cromwell attorney Brian Glueckstein, makes a repayment plan like this impractical.
FTT Token Valuation and Remarks
During the hearing, one of the main points of disagreement was the valuation of FTX’s native FTT tokens, which were held in significant quantities by creditors. FTT tokens were only valid on the defunct FTX.com, according to attorneys representing the FTX estate, meaning they had no value. Judge Dorsey rejected any challenges pertaining to the importance of FTT, concurring with this evaluation. Nevertheless, when the court’s ruling was made public, the value of FTT tokens shot up by 55%.
The court rejected additional arguments as well, such as requests for in-kind cryptocurrency reimbursements and disagreements on creditor property rights in relation to FTX’s terms of service.
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
Asset Recovery and Upcoming Distributions of FTX
The Company’s ability to repay its creditors has been greatly aided by the sale of FTX’s and its trading partner Alameda Research’s multiple assets and interests. Selling an 8% stake in the AI startup Anthropic for $884 million was one such deal. The considerable increase in bitcoin values after FTX’s collapse further strengthens the estate’s ability to pay back its creditors. For example, the price of bitcoin had risen from over $16,000 in November 2022 to over $62,000 at the time of the court’s ruling.
The exchange has recovered assets worth from $14.7 billion to $16.5 billion under the control of current CEO of FTX, John J. Ray III. The Ray who became FTX’s CEO after Sam Bankman-Fried left, called the plan’s approval by the court a “significant milestone.” He went on to say that the estate has worked in conjunction with international organizations and governments on its initiatives.
About the timeline for its initial creditor payouts, FTX intends to release more information. Though one of the biggest bankruptcy cases in cryptocurrency history is getting closer to being resolved thanks to the court’s decision. Even if creditors have benefited, others are still upset that FTX’s bankruptcy will prevent them from benefiting from the possible gains made by Bitcoin and other cryptocurrency prices rising sharply.
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