U.S. bankruptcy court has sanctioned FTX to solicit creditor votes for a liquidation plan that compensates customer claims in cash. This decision reflects the cryptocurrency prices at the time of FTX's collapse in November 2022. The ruling overrides the objections from some customers who demand higher payments following the rise in cryptocurrency values.
Creditors Object to Payment Scheme
Despite the court's approval, objections persist from certain creditors who argue that the plan underestimates the current value of cryptocurrencies, potentially shortchanging them. For example, Reuters notes that under the plan, customers who owned one Bitcoin at the collapse would receive $16,800, significantly less than its current market value.
Details of the Liquidation Plan
FTX has outlined that voting on the liquidation plan will continue until August 16, with a court date set for October 7 to seek final approval of the proposal. John J. Ray III, CEO of FTX, stated that returning the exact cryptocurrencies deposited is unfeasible due to the shortfall at the time of bankruptcy. The company reported having only a fraction of the Bitcoin and Ethereum claimed by customers in their balances.
Implications for Customers and Creditors
Ray emphasized that altering the payment amounts to reflect current market values would mean redistributing funds from other creditors, essentially reducing the payout for some to benefit others. According to past updates, approximately 98% of customers could access their full owed amounts within 60 days post-approval of FTX’s wind-down plans, with expedited payments for claims under $50,000.
Forward Outlook
As FTX navigates through its bankruptcy proceedings, the decision to approve the liquidation plan marks a critical step forward, although it remains contentious among stakeholders. With $11.4 billion in assets and potential growth to $12.6 billion by October, FTX's efforts to reconcile creditor claims while adhering to legal and financial constraints will continue to unfold in the public and legal eye. The outcomes of these proceedings will significantly influence perceptions and regulatory approaches towards cryptocurrency exchanges and bankruptcy protocols.
