FTX Customers To Vote On 119% Repayment Plan

FTX customers are to vote on a plan to recover up to 143% ($12.6 billion) of claims by October 7.

TakeAway Points:

  • A Chapter 11 repayment plan will be put to a vote by FTX consumers, who stand to gain up to 119% of their assets back.
  • The plan, which tries to resolve billions of dollars in government penalties, is opposed by some creditors but backed by important committees.
  • In October, when the proposal would go into force, FTX anticipates having $12.6 billion, compared to its current $11.4 billion.

The Compensation Plan of FTX

FTX customers will soon have the opportunity to vote on a multi-billion dollar compensation plan aimed at repaying victims whose assets have been locked since the exchange’s collapse. 

Judge John Dorsey announced on Tuesday that he will authorize FTX bankruptcy advisers to begin soliciting creditor votes on a comprehensive Chapter 11 plan. This plan not only aims to repay customers but also to resolve billions of dollars in government penalties related to the fraud-fueled implosion of Sam Bankman-Fried’s crypto business.

Recovering Customers and Creditors

The proposed plan marks a significant milestone in the nearly two-year-old bankruptcy case. According to court documents, the vast majority of FTX customers are expected to recover 119% of what they had on the platform as of November 2022, when the company filed for Chapter 11. 

Other creditors could see recoveries as high as 143% of their claims. FTX lawyers have clarified that bankruptcy law mandates the firm to value claims based on the date of the Chapter 11 filing, despite the subsequent increase in crypto prices.

FTX lawyer Andy Dietderich emphasized the importance of soliciting votes to gather feedback from the extensive pool of customers who have not been involved in negotiating the repayment plan. 

“We are seeking input from all affected parties to ensure a fair and comprehensive resolution,” Dietderich stated during a Delaware court hearing.

Monetization of Assets and Government

FTX is still in discussions with federal authorities to explore ways to use government claims against the exchange to compensate customers. The firm has already settled billions of dollars in tax claims with the US Internal Revenue Service. As of now, FTX holds $11.4 billion and advisers project this amount to increase to approximately $12.6 billion by the end of October, when the Chapter 11 plan could take effect.

Dietderich explained that FTX is monetizing its assets because the platform, under Bankman-Fried, did not have segregated digital assets linked to specific claims against the exchange. Instead, FTX possesses a ” pool of assets” acquired with stolen customer funds, he noted.

Voting and Authorization Schedule

Customers have until 4pm ET on August 16 to cast their votes on the compensation plan. Judge Dorsey is scheduled to consider approving the plan on October 7. The outcome of this vote will be crucial in determining the future of FTX and the extent to which customers and creditors can recover their lost assets.

FTX filed for bankruptcy after Bankman-Fried shut down the company’s crypto-trading platform in 2022 and handed control over to insolvency experts. Bankman-Fried was subsequently convicted of fraud, adding another layer of complexity to the bankruptcy proceedings.

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