- FTX customers will soon be asked to vote on a multi-billion dollar compensation plan to repay frozen assets
- Judge John Dorsey has allowed FTX bankruptcy advisers to solicit creditor votes on the Chapter 11 plan
- The process marks a significant step in resolving the nearly two-year-old bankruptcy case
Customers of the defunct cryptocurrency exchange FTX will soon be called upon to vote on a multi-billion dollar compensation plan designed to repay victims whose assets have been frozen since the company’s collapse. On Tuesday, Judge John Dorsey announced he would permit FTX bankruptcy advisers to solicit creditor votes on an extensive Chapter 11 plan which aims to reimburse customers and address billions of dollars in government penalties stemming from the fraudulent collapse of Sam Bankman-Fried’s crypto empire. This decision marks a significant step in resolving the nearly two-year-old bankruptcy case.
Creditor Holdings Have Been Recovered
FTX collapsed in November 2022 and many feared that their funds were lost forever. However, following extensive efforts by the bankruptcy team installed in FTX, customers could recover up to 119% of their assets that were on the platform at the time of the Chapter 11 filing following the exchange’s implosion. Other creditors might receive up to 143% of their claims.
The only fly in the ointment is that bankruptcy law mandates valuing claims at the time of the Chapter 11 filing, meaning that the cash payouts will be valued at November 2022 prices, when Bitcoin was at around $15,000.
Repayment Plan Will Be Put to Vote
Chapter 11 proceedings allow creditors of bankrupt companies to wield considerable influence over restructuring plans through their votes. To successfully emerge from bankruptcy, firms must garner creditor support, and while key committees representing customer interests back FTX’s plan, some vocal opponents are demanding substantial revisions before offering their approval.
During a Delaware court hearing, FTX lawyer Andy Dietderich revealed that the company is seeking votes to gather input from the broader customer base, many of whom have not participated in negotiating the repayment plan. FTX is also in discussions with federal authorities on how to use government claims against the company to compensate customers, Dietderich noted. The company has already settled billions in tax claims with the US Internal Revenue Service.
Currently, FTX holds $11.4 billion, with advisers projecting this figure to rise to approximately $12.6 billion by the end of October, when the Chapter 11 plan could be implemented, according to Dietderich.
Dietderich explained that FTX is liquidating its assets because Bankman-Fried’s platform lacked segregated digital assets linked to specific claims against the exchange. Instead, FTX holds a “crazy pool of assets” acquired with misappropriated customer funds.
Customers have until 4 PM ET on August 16 to cast their votes on the plan. Judge Dorsey is set to review and potentially approve the plan on October 7.
