6 months ago
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FTX CEO John J. Ray III stated that they are proposing a Chapter 11 plan that aims to return 100% of bankruptcy claims plus interest to non-governmental creditors.
Cryptocurrency exchange FTX, which caused a stir in the industry when it filed for bankruptcy in November 2022, has revealed a potentially favorable path for its creditors. According to an updated reorganization plan submitted on May 7, 2024, FTX estimates having between $14.5 billion to $16.3 billion available for distribution.
The proposed plan offers a glimmer of hope for the estimated 9 million customers and investors who experienced substantial losses when FTX collapsed. FTX’s plan to compensate investors could allow some creditors to receive payouts exceeding their initial claims by up to 142%.
118% Payout for Small FTX Creditors
The plan prioritizes smaller creditors by creating a “convenience class” for those with claims of $50,000 or less. Under this category, the exchange expects most of these creditors to get around 118% of their claims within two months of court approval. This quick repayment approach aims to reduce further financial strain on those potentially affected by FTX’s downfall.
FTX plans to generate the distribution pool by selling various assets, including investments held by Alameda Research, a crypto hedge fund previously led by Sam Bankman-Fried, FTX Ventures businesses, and possible settlements from ongoing legal cases. Importantly, the bankruptcy filing also covered assets controlled by entities such as the Bahamas Securities Commission and the United States Department of Justice.
Additionally, the updated plan emphasizes a collaborative approach. According to a statement from FTX, the document reflects a series of agreed-upon deals with key stakeholders. This consensus-building strategy aims to speed up the resolution of the bankruptcy proceedings, potentially reducing further delays for creditors.
“We are pleased to be in a position to propose a Chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors,” stated John J. Ray III, CEO of FTX.
FTX’s Road to Recovery
The FTX’s collapse has raised significant concerns. In February 2024, the company disclosed that it possessed only $6.4 billion in cash, a stark contrast to its previous financial standing. Earlier this year, the company’s founder, Sam Bankman-Fried, received a 25-year prison sentence for allegedly defrauding an estimated $8 billion from FTX’s customers.
The proposed plan, while potentially beneficial for the company’s creditors, does not erase the substantial losses incurred by FTX’s stakeholders. However, it represents a potential pathway towards financial recovery and underscores the ongoing efforts to navigate the complex bankruptcy process.
