FTX Update: Creditors to Vote on Cash or Crypto Repayment Plan
FTX’s proposed reorganization plan seeks to repay creditors the U.S. dollar value of their crypto assets at the time of the exchange’s collapse in cash.
Creditors of the bankrupt cryptocurrency exchange FTX are now faced with the option of receiving their assets in cash or crypto.
A filing in the United States Bankruptcy Court for the District of Delaware revealed that Judge John Dorsey had approved the solicitation packages and ballots needed for the exchange’s customers to communicate their preferences. The deadline for voting is August 16, and Judge Dorsey will decide on the matter in early October.
Cash or Crypto for FTX Repayments
FTX’s proposed reorganization plan seeks to repay creditors the U.S. dollar value of their crypto assets at the time of the exchange’s collapse in cash. The bankruptcy estate proposed a 118% return for 98% of creditors with claims less than $50,000. In addition, non-governmental creditors will receive 100% of their claims and potential additional interest payments of up to 9% from when FTX collapsed.
The embattled crypto trading platform also disclosed that it had amassed more than was needed to repay affected parties. While creditors lost approximately $11 billion when FTX went bankrupt in 2022, the estate has gotten over $16 billion from consolidating funds and selling assets, including properties belonging to former FTX executives.
When FTX halted withdrawals and imploded in November 2022, bitcoin (BTC) traded at around $16,000. However, at the time of writing, the crypto asset was worth over $61,000, recording a 281% increase since then. Besides BTC, the total crypto market cap has more than doubled since November 2022, from $1 trillion to $2.27 trillion, indicating that other crypto assets, including large-cap altcoins, have also rallied.
FTX Creditors Object Plan
Considering the growth witnessed by the crypto market in the past 20 months, it would be deemed unfair that FTX creditors receive the cash value of their holdings at the time of the collapse. However, FTX lawyers argue that the proposed plan is in line with bankruptcy laws, which demand that the exchange repay claims in accordance with their value while filing for Chapter 11.
Additionally, FTX lawyers insisted that implementing the cash repayment plan would ensure creditors are not subject to capital gain taxes.
Meanwhile, FTX creditors, led by activist Sunil Kavuri, filed an objection to the proposed plan earlier this month. They argued that the plan failed to meet certain requirements of the Bankruptcy Code, including property rights issues, consistent debtors liquidation analysis, and satisfying the best interest test.
The post FTX Update: Creditors to Vote on Cash or Crypto Repayment Plan appeared first on CryptoPotato.
What's Your Reaction?
