The FTX Creditor’s Bankruptcy Plan: A Path to Full Recovery, Plus Interest for Claims, and Implications for Creditors
The collapse of the exchange may have been a less good result for investors who had invested in it. When FTX bankruptcy took place in November 2022, it was going for $16,080. But crypto prices have soared as the economy recovered while the assets at FTX were sorted out over the past two years. A single bitcoin on Tuesday was selling for close to $62,675. If accrued interest is taken into account, the loss comes to 290%, less than that if those investors had held onto those coins.
Filed on Tuesday, the FTX bankruptcy plan charts a path to a full recovery, plus interest, for practically all creditors—made possible, according to FTX, by the liquidation of billions of dollars’ worth of investments made by the exchange’s venture capital arm, FTX Ventures, and its sister company, Alameda Research.
1,600 people are included in the FTX creditor’s voting block, which was formed in January. The new plan is due to be put to a vote in June; the leaders of the block—Sunil Kavuri and Arush Sehgal—will urge members to vote against its approval. “The recovery percentages are drawn from a fake baseline. Sehgal says it’s a false narrative. It is an insult to those who have the money.
Sam Bankman-Fried resigned as CEO of the exchange. In March he was sentenced to 25 years in prison for the massive fraud that occurred at FTX.
Under the proposed plan, government bodies in the United States—including the Internal Revenue Service and the Commodities and Futures Trading Commission—have agreed to suspend high-value claims against FTX until creditors had been repaid (although the IRS will receive a $200 million upfront payment as part of the settlement).
Customers and creditors that claim $50,000 or less will get about 118% of their claim, according to the plan, which was filed with the U.S. Bankruptcy Court for the District of Delaware. This covers about 98% of FTX customers.
The plan provides for supplemental interest payments to the extent that funds continue to exist, according to the filing. The interest rate for most creditors is 9%.
John Ray III, the CEO of FTX, a Crypto-Coincurrency Exchange and a Changing Parameter of Crypto-Cryptanalysis
FTX said that it was able to recover funds by monetizing a collection of assets that mostly consisted of proprietary investments held by the Alameda or FTX Ventures businesses, or litigation claims.
Bankman-Fried was convicted in November of fraud and conspiracy — a dramatic fall from a crest of success that included a Super Bowl advertisement, testimony before Congress and celebrity endorsements from stars like quarterback Tom Brady, basketball point guard Stephen Curry and comedian Larry David.
John Ray III is best known for trying to clean up the mess caused by the collapse of Enron, and was named the company’s new CEO.
Ray said in the prepared statement that he was pleased to be in a position to propose a chapter 11 plan that would return all of the claims plus interest.
FTX is a company, but its future is unknown. In early 2023, Ray said that he had formed a task force to explore reviving FTX.com, the crypto exchange.
The sordid details of a company run amuck that emerged after its assets were seized would hamstring almost any business attempting a comeback, but there may also be different parameters for cryptocurrency exchanges.
