FTX Creditors Set to Receive $9 Billion Disbursement

In what’s being hailed as a major breakthrough in one of the most challenging financial frauds in the cryptocurrency world, FTX creditors are on the cusp of a significant victory. 

A proposed settlement could see the disbursement of a staggering $9 billion to creditors by mid-2024.

“The FTX Debtors estimate that customers of FTX.com and FTX US would receive, collectively, over 90% of distributable value worldwide if the Amended Plan is approved by the Bankruptcy Court by the end of the second quarter of 2024,”

the statement reads.

For FTX.com, this estimated value is $8.9 billion, while for FTX.US, it is $166 million. It’s a monumental step toward rectifying a situation that could have resulted in a near-total loss for customers.

(4/4) All creditor representatives involved agreed to support a related amended Plan of Reorganization to be filed by 12/16/23: https://t.co/qAp9kxXNEP

— FTX (@FTX_Official) October 17, 2023

The Perseverance of FTX

FTX, a once-thriving cryptocurrency exchange, succumbed to the tides of financial distress in November 2022. The exchange’s collapse posed substantial challenges, but it has since become a testament to resilience and recovery, all thanks to an intricate settlement proposal.

Chief Restructuring Officer John J. Ray III expressed his jubilation, describing the collapse of FTX as “the most challenging financial disaster” he has encountered. Nevertheless, the proposed settlement is poised to redefine the exchange’s fate and the fortunes of its creditors.

“Together, starting in the most challenging financial disaster I have seen, the debtors and their creditors have created enormous value from a situation that easily could have been a near-total loss for customers,”

said John J. Ray III.

Notably, the proposal indicates the potential exclusion of “insiders, affiliates, customers” who may have known commingling and misuse of customer deposits and corporate funds. 

This exclusion also extends to individuals who altered their Know Your Customer (KYC) information to expedite withdrawals when the exchange suspended operations.

The proposal suggests that payouts to these individuals may not accurately reflect the fair value of their claims. It’s a critical step to ensure that creditors who played a role in the events leading to the exchange’s fall do not disproportionately benefit from the settlement.

A Multifaceted Approach

The proposed plan envisages the division of missing customer assets into three distinctive pools based on their circumstances at the onset of the Chapter 11 cases. These pools are earmarked for FTX.com customers, FTX.US customers, and a “General Pool” catering to other miscellaneous assets.

Crucially, customers with a preference settlement amount below $250,000 will have the opportunity to accept the settlement without any reduction in their claims or payments. A preference settlement is calculated as 15% of customer withdrawals on the exchange during the nine days preceding its collapse.

Additionally, creditors will be eligible to receive a “Shortfall Claim,” which accounts for the portion of losses not covered by insurance policies or other contractual agreements. 

This claim is set against the general pool, commensurate with the estimated value of the missing assets.

“The FTX Debtors currently anticipate that customers of both exchanges will not be paid in full, with greater percentage losses by customers of FTX.com,”

says the amended plan.

The Plan Term Sheet is a compromise between the Committee, the Debtors, the ad hoc customer committee and other representatives on a range of issues that balance the rights of customer and non-customer creditors across the U.S. and foreign debtors.

— Official Committee of Unsecured Creditors of FTX (@FTX_Committee) October 17, 2023

FTX – A Comeback in the Making

The cryptocurrency community has witnessed the journey of FTX from the brink of collapse to an impending turnaround that could set an industry precedent. 

FTX’s commitment to addressing the issues head-on and providing a comprehensive plan for creditors marks a significant shift in how FTX is handling these financial challenges.

The proposal signifies a concerted effort to resolve customer property litigation and ensure the confirmation of the Amended Plan by the second quarter of 2024. 

FTX CEO John J. Ray III emphasized the significance of this plan as he described it as “another major milestone.” He also recognized the extraordinary value created by the debtors and their creditors amidst an immensely challenging financial disaster.

The proposal offers a path toward closure for FTX, its creditors, and the larger cryptocurrency world. By addressing the financial turmoil head-on, FTX is taking proactive measures to rectify the situation and bring long-overdue relief to its creditors.

The future of FTX and its creditors hangs in the balance, but if all goes according to plan, it could signify not only the end of one of the most challenging financial disasters but also the dawn of a new era for cryptocurrency exchanges and their approach to addressing financial disasters like that.