sbf 3fpTl2 FTX Creditors to Receive Compensation, but Some Argue It’s Not Enough

FTX Creditors to Receive Compensation, but Some Argue It’s Not Enough

FTX, the bankrupt cryptocurrency exchange, has unveiled a new proposal that promises to repay a significant portion of its creditors’ claims, plus additional compensation for the time value of their investments.

The plan, which is subject to approval by a Delaware bankruptcy court, could distribute between $14.5 and $16.3 billion to creditors within 60 days of its effective date.

TLDR

FTX’s latest proposal could repay up to $16.3 billion to creditors, with 98% of creditors eligible for a 118% recovery.
The plan reimburses creditors for the value of their assets at the time of FTX’s bankruptcy in November 2022, rather than at current prices.
Some industry pundits argue that the proposal falls short of being fair, as creditors aren’t set to recover their funds in an amount equivalent to current market prices.
FTX confirmed that its restructuring plans will not include a reboot of the cryptocurrency exchange.
The new reorganization plan must first be approved by a Delaware bankruptcy court.

Under the new proposal, 98% of FTX’s creditors, those holding claims below $50,000, will be eligible for a 118% recovery. This means that these creditors stand to receive not only the full value of their claims but also an additional 18% as compensation for the time their funds have been tied up in the bankruptcy proceedings.

For non-governmental creditors with claims above $50,000, FTX proposes to repay 100% of their claims plus up to 9% interest. While this may seem like a generous offer, some industry experts argue that it still falls short of being truly fair to creditors.

The Controversy Surrounding the Plan

The main point of contention lies in the fact that FTX’s repayment plan is based on the value of creditors’ assets at the time of the exchange’s bankruptcy in November 2022.

Since then, the cryptocurrency market has experienced a significant resurgence, with Bitcoin, for example, rising by nearly 280%.

Critics argue that creditors should be entitled to recover their funds in an amount equivalent to current market prices, rather than the value at the time of FTX’s collapse.

Mike Belshe, CEO of BitGo, expressed his dissatisfaction with the proposal on social media, stating,

“I understand why the bankruptcy process needs to work this way but let’s not pretend victims are getting their money back.”

Despite the controversy surrounding the repayment plan, it is undoubtedly a step forward in the lengthy and complex process of resolving FTX’s bankruptcy. The proposal must now be approved by a Delaware bankruptcy court before it can be implemented.

It is worth noting that FTX has confirmed that its restructuring plans will not include a reboot of the cryptocurrency exchange, which was once among the largest platforms by trading volume. Instead, the focus remains on maximizing recoveries for creditors and navigating the legal and regulatory challenges that lie ahead.

While the proposed repayment plan may not satisfy everyone, it is a significant milestone in the ongoing efforts to bring closure to those affected by FTX’s collapse.

The post FTX Creditors to Receive Compensation, but Some Argue It’s Not Enough appeared first on Blockonomi.

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