FTX customers will be asked in the coming weeks to vote on the failed crypto exchange’s multi-billion US dollar plan for compensating victims whose assets have been locked on the platform since it collapsed.
Judge John Dorsey said on Tuesday (Jun 25) he will authorise FTX bankruptcy advisers to begin soliciting creditor votes on a sweeping Chapter 11 plan to repay customers and resolve billions of US dollars in government penalties related to the fraud-fueled implosion of Sam Bankman-Fried’s crypto business.
The decision represents a major milestone in resolving the nearly two-year-old bankruptcy. Creditors of failed companies have the power to sway restructurings through Chapter 11 voting and firms must rally their support in order to exit bankruptcy. FTX’s plan is supported by key committees representing the interests of customers, though a vocal contingent has vowed to oppose the plan without major changes.
The vast majority of FTX customers will likely get 119 per cent of what they had on the platform the day the company filed Chapter 11 in November 2022. Other creditors could recover as much as 143 per cent of what they are owed, according to court documents. FTX lawyers have said bankruptcy law requires the firm to value claims at the time FTX filed Chapter 11, even though crypto prices have increased since then.
FTX lawyer Andy Dietderich said on Tuesday during a Delaware court hearing that the firm is soliciting votes in order to get feedback from the vast pool of customers who haven’t been involved in negotiating the repayment plan.
FTX is still negotiating with federal authorities that are considering ways to use government claims against FTX to compensate customers, Dietderich said. The firm has already settled billions of US dollars in tax claims asserted by the US Internal Revenue Service.
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FTX currently has US$11.4 billion and advisers anticipate it will have about US$12.6 billion at the end of October, when the firm’s Chapter 11 plan could take effect, Dietderich said.
Dietderich said FTX is monetizing its assets because Bankman-Fried’s platform, generally, didn’t have segregated digital assets “that had any relationship to claims against the exchange”. Instead, FTX has a “crazy pool of assets” that were purchased with stolen customer funds, he said.
Customers have until 4 pm ET on Aug 16 to vote on the plan, according to court documents. Judge Dorsey will consider approving the plan on Oct 7.
FTX filed bankruptcy after Bankman-Fried shut down the company’s crypto-trading platform in 2022 and handed control to insolvency experts. Bankman-Fried was later convicted of fraud. BLOOMBERG
