FTX debtors have revised the Settlement Proposal in response to the United States Trustee for Regions Three and Nine (the ‘U.S. Trustee’) objection to its earlier motion.
The bankrupt crypto exchange has done this in an effort to address the issues raised by the U.S. Trustee where it stated that the maximum Settled Value for claims covered by the procedures $10million is far too high to constitute a “small” claim without even providing adequate notice as to the nature of the claims.
In reply to this remark, debtors called the U.S. Trustee “the sole objector to the Motion”, seeking to inject itself into a routine settlement process that is already adequately safeguarded by two different creditor committees.
The two creditor committees are the Official Committee of Unsecured Creditors and the ad hoc committee of international customers.
In the latest revision, debtors have proposed reducing the maximum Settled Value for claims covered by the procedures to $7m. In the previous proposal, debtors were authorised to settle any Small Estate Claims in their business judgement where the Settled Value of such Small Estate Claim was less than or equal to $10m.
Now, if the Settled Value for the Small Estate Claim is greater than $7m, it has been proposed that the Debtors shall seek Court’s approval of the proposed settlement pursuant to Bankruptcy Rule, or as otherwise provided under the Bankruptcy Code and Bankruptcy Rules.
The latest proposal has also included the U.S. Trustee as a third Noticed Party. Any objections from the “noticed parties” would need to be resolved or settled through an order of the court before the claim process can go through.
Other revisions include the debtors proposing to limit the claims to which the procedures apply and filing monthly reports of executed settlements.
The debtors have also stated that the proposed Settlement Procedures would allow for “quick, efficient, and cost-effective resolutions of large volumes of Small Estate Claims in its latest reply. These streamlined settlements would “maximise recovery for all creditors as well as minimise the burden placed on the Court in resolving potentially thousands of individual Bankruptcy Rule 9019 motions”.
Crypto exchange FTX had filed for bankruptcy protection in the US in November 2022. Before this event, it was the world’s third largest digital assets exchange.
Back then, the bankruptcy filings said FTX US and Alameda Research had between $10bn and $50n in liabilities and a similar range in assets, and estimated that “funds will be available for distribution to unsecured creditors”.