A group of FTX creditors, led by Sunil Kavori, filed an objection to the reorganization plan

A group of FTX creditors, led by Sunil Kavori, has filed an objection to FTX’s bankruptcy reorganization plan. They reject it for several reasons, including the claim that it does not serve the best interests of creditors.

The creditors claimed that the cash payment would trigger a taxable event, resulting in undue costs for them. Reimbursement of assets in kind was included in the objection as a potential solution.

Additionally, creditors objected to the release of funds to the debtors – FTX – citing Chapter 11, ultimately alleging that bankrupt FTX was attempting to distribute stolen assets.

The first page of the creditor’s opposition. Source: Sunil Kavori.

RELATED: FTX Reaches $200 Million Settlement With IRS Over Tax Bill.

These objections come after months of friction between FTX’s bankruptcy company, former customers and FTX’s creditors. In 2023, FTX’s Official Unsecured Creditors Committee (UCC) declared itself “deeply disappointed” by the plan to reorganize FTX’s bankruptcy estate, saying it had not been contacted to participate in the initial project process.

UCC also asserted that the plan’s provisions would complicate an already busy bankruptcy process, thereby increasing the time and costs of settlement proceedings.

In January 2024, FTX’s former customers and creditors demanded that the now-defunct exchange compensate them using current market prices, as opposed to the low prices of 2022, when the FTX exchange collapsed at most depth of the cryptocurrency bear market.

This dispute has become a major point of contention in the ongoing bankruptcy proceedings, as FTX Properties and creditors continue to contest the in-kind proposal and the broader issue of property rights.

Tensions between FTX creditors and the bankruptcy estate flared again in February 2024 when FTX creditors launched a lawsuit against Sullivan & Cromwell, the law firm overseeing FTX’s bankruptcy. They claim the company was complicit in the FTX scam and was aware of the dire situation in the previous exchange before the collapse.

An independent investigation later found Sullivan & Cromwell innocent of any wrongdoing and confirmed that the law firm was unaware of fraudulent activity at FTX before its collapse.

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