FTX has obtained court permission to ask creditors if they would prefer to receive…
FTX has received court approval to ask creditors whether they would prefer to receive their repayments in cash – under FTX’s current liquidation plan – or in cryptocurrency at its current market value.
U.S. Bankruptcy Judge John Dorsey granted FTX approval of the voting plan on June 25.
Many of FTX’s creditors were unhappy with FTX’s latest liquidation plan in May, which proposed a 118% return for 98% of creditors – those with claims under $50,000 – to be paid in US dollars, based on the value of the assets at the time the application was filed by FTX. . File for bankruptcy in November 2022.
However, many of FTX’s creditors are seeking in-kind compensation in cryptocurrencies, which would account for the 165% increase in the total market capitalization of the cryptocurrency market since the stock market crash.
To put into perspective the reluctance of some creditors to make cash payments, the price of Bitcoin (BTC) was trading at around $16,900 when FTX filed for bankruptcy, but has since risen 265% to $61,770 at the time of publication.
FTX attorney Andy Dietderich said during the hearing that the purpose of the vote was to receive feedback from a large group of FTX customers who had not yet participated in payment negotiations.
However, FTX lawyers argued that bankruptcy laws required the company to evaluate claims at the time FTX filed for Chapter 11 bankruptcy, which is consistent with the proposed plan.
The lawyers added that the currently proposed cash repayment plan would be easier to implement because creditors would not be subject to capital gains tax.
It should be noted that even if creditors vote in favor of repaying cryptocurrencies in kind, this does not mean that the court is obliged to approve it.
Creditors will have until Aug. 16 to vote on the plan, according to court documents, and Dorsey will decide whether to approve the plan on Oct. 7.
FTX has collected $11.4 billion in cash since filing for bankruptcy, but Diederich expects that figure to reach $12.6 billion by October 31, when FTX’s Chapter 11 plan comes into effect. in force.
about: CoinShares Gets 116% Return on FTX Debt Sale
FTX was among the largest cryptocurrency exchanges in the world before its collapse in November 2022.
Nearly $8 billion in funds were misappropriated from millions of customers. Much of this money was misused by FTX’s trading company, Alameda Research, leading to a liquidity crisis as clients sought to cash out their assets.
The defunct exchange was handed over to current FTX CEO John Ray, a turnaround specialist who is still actively involved in the bankruptcy case.
Meanwhile, the company’s former CEO, Sam Bankman-Fried, was convicted of multiple counts of fraud and money laundering in November 2023 and subsequently sentenced to 25 years in prison in March.
review: Deposit Risks: What Do Cryptocurrency Exchanges Do With Your Money?
