A U.S. bankruptcy judge has greenlit a reorganization plan for FTX, paving the way for potential repayments to creditors two years after the crypto exchange’s dramatic collapse. The decision, handed down by Judge John Dorsey on October 7th, marks a significant milestone in the ongoing legal saga surrounding FTX.
FTX Repayments to Clients will be in Cash and Interest
The approved plan allows for the distribution of funds to creditors, with 98% expected to receive at least 118% of their claim value in cash. This move follows a prior vote by creditors, with approximately 94% of “dotcom customer entitlement claims” creditors (representing $6.83 billion in claims) voting in favor of the plan.
However, the approval wasn’t without dissent. Sunil Kavuri, representing the largest FTX creditor group, argued for repayment in cryptocurrencies rather than cash. This argument echoed concerns raised by another creditor lawyer, David Adler, who highlighted potential tax implications for creditors receiving cash payouts.
Regarding in-kind distributions, Steven P. Coverick, representing the bankruptcy estate, stated that the plan would not include such distributions due to FTX’s lack of sufficient cryptocurrency holdings to match customer account balances. Judge Dorsey further solidified this position by declaring FTX’s native token, FTT, to be valueless. He reasoned that the token’s value was intrinsically linked to the failed exchange and wouldn’t likely recover on its own.
Discussions about a potential “FTX 2.0” reboot also surfaced but ultimately fizzled. While FTX CEO John Ray III initially explored the idea in 2022, lawyer Andrew Dietderich later confirmed in January 2024 that no investors expressed interest in financing a revival.
This court decision signifies a crucial step towards resolving the aftermath of the FTX implosion. As the case progresses, the sentencing of former FTX executives, including Sam Bankman-Fried and Caroline Ellison, continues to unfold. Bankman-Fried is currently serving a nearly 25-year prison sentence after his conviction on various fraud charges, while Ellison received a two-year sentence for her role in the downfall. The sentencing of former FTX executives Gary Wang and Nishad Singh is also expected in the coming weeks.
