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The embattled cryptocurrency exchange, FTX, has unveiled a revised proposal aimed at reimbursing as much as 90% of the holdings owed to creditors prior to the exchange’s demise in November of the previous year.
The responsibility for overseeing the bankruptcy process currently rests with a group of debtors, which plans to formally submit the proposal to a U.S. Bankruptcy Court for review no later than December 16, 2023.
FTX’s downfall occurred in the wake of damning revelations regarding its financial health, as brought to light by CoinDesk. The newly appointed CEO, John J. Ray III, has sharply criticized the lax financial controls that prevailed within the company, while its founder, Sam Bankman-Fried, is embroiled in a legal trial, facing criminal charges.
The debtors’ plan entails the categorization of the missing customer assets into three distinct pools, each based on the conditions prevailing at the inception of the Chapter 11 proceedings: one for assets reserved for FTX.com customers, another for FTX.US customers, and a “General Pool” for miscellaneous assets.
Under the proposal, customers with a preferred settlement amount of less than $250,000 can accept the settlement without any reduction in their claims or payments. The preference settlement amounts to 15% of customer withdrawals made on the exchange within nine days preceding its collapse.
Creditors will also be entitled to a “Shortfall Claim” from the general pool, corresponding to the estimated value of the assets that went missing on the exchange—roughly $9 billion for FTX.com and $166 million for FTX.US, the exchange’s U.S. branch.
Nevertheless, these recoveries may face potential complications stemming from various factors such as tax implications, government claims, token price volatility, and more.
Furthermore, the debtors maintain the authority to exclude any individuals designated as “insiders, affiliates, or customers” from the settlement if there is evidence of their involvement in the commingling and misappropriation of customer deposits and corporate funds, or if they altered their KYC information to expedite withdrawals when withdrawals were halted. In such cases, the payouts for these individuals may not accurately represent the fair value of the claims held by FTX Debtors.
