The now-defunct FTX cryptocurrency exchange has unveiled a proposed settlement plan this week in an effort to resolve issues surrounding customer assets lost during the company's bankruptcy filing in November 2022.
FTX's Proposed Rescue Plan for Traders
FTX Debtors Lay Out a Path to Recovery: 90% Asset Retrieval Proposed in Bankruptcy Plan
The FTX debtors have put forward a proposed settlement plan that includes prioritized reimbursements to customers and an offer to reduce potential preference liability. If approved, customers are expected to recover more than 90% of their assets on a global scale. FTX has submitted this settlement plan in Delaware's bankruptcy court, with the goal of gaining approval by the second quarter of 2024.
The proposed settlement divides FTX assets into three categories, serving FTX.com customers, FTX US customers, and a general pool. Customers are granted priority "shortfall claims" against the general pool, which is estimated to be worth approximately $9 billion.
Priority Payments Proposed for Defaulted FTX Customers
When considering both priority and non-priority portions of the shortfall claim, the FTX Debtors estimate that customers of FTX.com and FTX US could collectively recover over 90% of the distributable value worldwide if the Amended Plan receives approval, as outlined in the announcement.
"Starting in the most challenging financial disaster I have seen, the debtors and their creditors have created enormous value from a situation that easily could have been a near-total loss for customers," said John J. Ray III, FTX's chief restructuring officer and current CEO.
To address potential preference claims, FTX has presented a proposal to customers, which would reduce payouts based on net withdrawals made within nine days before the bankruptcy. Customers are required to repay 15% of the amount by which their withdrawals exceeded deposits during that timeframe.
Proposal to Reduce Preference Liability Based on Net Withdrawals and Deposits
For instance, if a customer withdrew $100,000 but only deposited $20,000 within the nine days before the bankruptcy, their net withdrawal would be $80,000. They would then repay 15% of this amount, which is $12,000, ultimately reducing their payout. Customers with less than $250,000 in net withdrawals will not be subject to any reductions under this arrangement. FTX also retains the option to exclude certain customers from this offer.
It's important to note that the actual recovery percentages remain uncertain and depend on variables like asset sales, litigation outcomes, and fluctuations in cryptocurrency prices, as emphasized in the announcement. Non-customers are expected to face more significant losses compared to exchange users under this arrangement. FTX has described this deal as a "major milestone" achieved through "months of extensive, arm's-length negotiations" involving major creditors such as the customers committee.
What are your thoughts on the FTX debtors' proposed settlement plan? Feel free to share your insights and opinions on this matter in the comments section below.
Post a Comment