US Bankruptcy court approves FTX Plan of Reorganization
FTX has announced that less than two years after its historic bankruptcy filing, the United States Bankruptcy Court for the District of Delaware has approved FTX's Plan of Reorganization.
According to a federal bankruptcy judge's decision on Monday, nearly all of the creditors of the defunct cryptocurrency company FTX will ultimately benefit from the capital they invested in the exchange.
District of Delaware Bankruptcy Judge approval
In an attempt to begin allocating funds to creditors, U.S. Bankruptcy Court for the District of Delaware Judge John Dorsey approved the plan during a hearing on Monday.
Subject to know-your-customer and other distribution requirements, the Plan stipulates that 98% of FTX's creditors by number will receive roughly 119% of the total amount of their permitted claims within 60 days of the Plan's effective date.
FTX Total Value made for Distribution
According to FTX, between $14.7 billion and $16.5 billion will be the total value of property that is gathered, turned into cash, and made available for distribution.
This sum comprises assets owned by the Chapter 11 debtors, the administrators of FTX Australia, the United States Department of Justice, the joint official liquidators of FTX Digital Markets, Ltd. (Bahamas), and numerous private parties that have assisted with the recovery.
FTX Distribution Plan
The Plan's effective date and anticipated first distribution date will be separately announced by the debtors when the time comes.
FTX Chief Executive Officer and Chief Restructuring Officer John J. Ray III stated: "The Court's approval of our Plan marks a significant milestone in our process of disbursing funds to customers and creditors. The estate is in the process of finalizing plans to distribute assets to creditors in over 200 countries worldwide.
Mr. Ray expressed his gratitude to all of FTX's clients and creditors for their patience during this process.
Spokesperson for biggest FTX creditor group criticized FTX Plan
A representative of the biggest group of FTX creditors, Sunil Kavuri, criticized the Plan. In September, FTX creditor Kavuri, who was present at the bankruptcy hearing, claimed that users would only get back 10–25% of the cryptocurrency's value.
According to Kavuri, when the exchange declared bankruptcy in 2022, the price of Bitcoin was roughly $16,000, and the estate ought to distribute cryptocurrency in kind instead of cash. As of the time of writing, the price of the cryptocurrency was over $63,000. For almost two years, millions of users have been deprived of access to tokens valued at billions of dollars in their FTX accounts.
Some creditors' attorney, David Adler, has also stated in court that if creditors received their payout in cash rather than in kind, they would receive a significant tax bill.
Later, during Monday's hearing, Judge Dorsey raised objections to permitting in-kind distributions.
The native token of the exchange, FTT, has no value
On Monday, Judge Dorsey reiterated that FTT, the exchange's native token, has no value. The judge said, as of today, I have no proof that the value of FTT tokens would be anything but zero.
The judge went on to say that the debtors and FTT tokens were inseparable. He added that there is no basis for the token's value to rise because the debtor is not going to revive the exchange.
FTX declared bankruptcy: Caroline Ellison sentenced to two years
At the end of 2022, FTX declared bankruptcy. Sam Bankman-Fried, the CEO of the exchange, was sentenced to almost 25 years in prison after being found guilty on seven criminal counts in November 2023, including two counts of wire fraud and conspiracy to commit wire fraud. Later, sister trading company Alameda also failed, and its CEO, Caroline Ellison, received a two-year sentence for her part in FTX's demise.
Ellison was charged and cooperated with prosecutors, as were former FTX executives Gary Wang and Nishad Singh. Singh's sentencing is scheduled for later this month, while Wang's sentencing is scheduled for late November.
Will the FTX Repayment Plan shake the crypto market?
Similar to the July 2024 repayments from Mt. Gox, the distribution of billions of dollars to cryptocurrency users may have an effect on the market. Bitcoin fell 10% in a few hours, from about $62,000 to as low as $53,600 on July 4, when news of the repayments regarding Mt. Gox began in July 2024.
A wave of liquidations swept through the cryptocurrency market as a result of this steep drop, wiping out leveraged positions worth over $425 million. Bitcoin wasn't the only cryptocurrency experiencing volatility; the whole market was shaken, with many altcoins seeing double-digit percentage declines.
However, Mt. Gox wasn't the only factor in the market's response. News of the German government selling hundreds of millions of dollars' worth of Bitcoin that had been seized from illegal activity coincided with these repayments.
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