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Failed Cryptocurrency Exchange FTX Proposes Reorganization Plan with Offshore ‘Rebooted’ Platform

In a bid to address its financial troubles, the embattled cryptocurrency exchange FTX has submitted a draft plan of reorganization that could potentially mark a new chapter for the company. The plan, filed on Monday, outlines the establishment of a “rebooted” offshore exchange, catering exclusively to non-U.S. users.

Under the proposed plan, claimants would be organized into different groups, with FTX.com offshore exchange users referred to as “dotcom customers” and FTX US users as “U.S. customers.” The process would involve each dotcom customer receiving a pro-rata share of the proceeds from a pool of assets linked to the FTX.com exchange. This distribution would occur after accounting for dotcom customer convenience class distributions and expenses.

The bankruptcy administrator suggested two potential routes for the dot-com customer pool. The first option is to create a new company, in collaboration with third-party investors, to operate the “rebooted” offshore platform. It is essential to note that this new platform would not be accessible to U.S. investors, making it exclusive to international users. The second option is to explore the possibility of a merger or similar transaction.

Interestingly, the reorganization plan may not involve a cash-only distribution to dot-com customers. Instead, the Debtors might opt to offer non-cash consideration, such as equity securities, tokens, or other interests in the Offshore Exchange Company, or even rights to invest in such assets.

On the other hand, FTT holders might not be as fortunate. The plan states that their claims will be canceled and extinguished as of the Effective Date, and they will not receive any distribution.

Moreover, the draft plan outlines subordination for claims coming from non-customers, including those related to regulatory penalties and taxes. This means that such claims will be considered lower in priority compared to those of the exchange’s users.

FTX’s filing comes as a crucial moment in the crypto industry, as numerous exchanges face increasing scrutiny and financial challenges. The proposed establishment of an offshore exchange exclusively for non-U.S. users might open new avenues for international traders. However, it also raises questions about the company’s overall stability and regulatory compliance.

While the reorganization plan offers hope for FTX’s dotcom customers, it leaves FTT holders in a precarious position, with no entitlement to a distribution. As the plan moves forward, the fate of FTX and its stakeholders will be closely watched by the cryptocurrency community, investors, and regulators alike. Only time will tell if this proposed “rebooted” offshore exchange will bring the desired stability and success to the troubled cryptocurrency exchange or further exacerbate its challenges.

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