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A suggested resolution might result in creditors being entitled to an $8.9 billion shortfall claim from FTX.com and $166 million from FTX.US. The patrons of insolvent crypto platforms FTX and FTX.US stand to potentially reclaim over 90% of their assets by the conclusion of the second quarter in 2024, following the endorsement of a proposed settlement between FTX creditors and debtors.
On the 17th of October, FTX debtors announced a “significant milestone” in their Chapter 11 proceedings after extensive deliberations with the unsecured creditors’ committee, a panel representing non-U.S. customers, and class action plaintiffs concerning disputes over customer property. While FTX debtors submitted a notice of the proposed settlement to a Delaware-based U.S. bankruptcy court on October 16 (for informational purposes), an official filing seeking court approval must be submitted by December 16.
The revised plan encompasses a “shortfall claim,” wherein FTX debtors estimate that customers of both FTX.com and FTX.US would collectively receive 90% of the assets available for distribution. The projected shortfall claim stands at approximately $8.9 billion for FTX.com and $166 million for FTX.US. Pending approval from the bankruptcy court, FTX anticipates the disbursement of these funds by the close of the second quarter in 2024.
John J. Ray III, the CEO and chief restructuring officer of FTX, expressed satisfaction with the settlement terms: “In navigating through one of the most challenging financial disasters I have witnessed, the debtors and their creditors have generated immense value from a situation that could easily have resulted in a near-total loss for customers.”
However, FTX debtors anticipate that customers of both exchanges may not receive full payment, with FTX.com potentially facing a higher percentage of losses.
FTX customer clawbacks
In the interim, observers pointed out that a component of the proposed plan stipulates that customers who withdrew over $250,000 from the exchange within nine days of bankruptcy would witness a 15% reduction in their claims. However, claims under $250,000 would remain unaffected by any reduction, as clarified by FTX debtors. “Eligible customers with a preference settlement amount of less than $250,000 during the nine-day period can accept the settlement without any reduction in claim or payment.”
As part of the amended plan, FTX reserves the right to exclude insiders, affiliates, and customers who might have possessed knowledge of the mingling and misuse of customer deposits and corporate funds from the settlement.
Former FTX CEO Sam Bankman-Fried finds himself two weeks into his fraud trial, facing charges related to his involvement in FTX’s descent into bankruptcy last November.
