In a new amended proposal floated by the now-defunct crypto exchange FTX, the return of an estimated 90% of customer funds has been proposed.
The Amended Plan of Reorganisation and Customer Recoveries Update came into being after a settlement was reached between FTX creditors and debtors.
The FTX Debtors, a group that is currently overseeing the bankruptcy process, have estimated that customers of both FTX and FTX.US could see over a majority of assets being returned to them.
The proposal is subject to the approval by the US Bankruptcy Court by the end of the second quarter of 2024. The group plans to file the plan by 16 December 2023 for the court’s perusal.
The debtors have suggested dividing missing customer assets into three pools: Assets segregated for FTX.com customers; Assets for FTX.US customers; and a “General Pool” of other assets. This is based on circumstances at the start of the Chapter 11 cases.
Customers of the two exchanges will also benefit from a ‘Shortfall Claim’ against the General Pool corresponding to the estimated value of assets missing at their exchange. This claim is estimated to be approximately $8.9billion for FTX.com and $166million for FTX US.
The preference settlement is set at 15% of customer withdrawals on the exchange, nine days before the exchange went bankrupt. Customers with a preference settlement amount of less than $250,000 can accept the settlement without any reduction of claim or payment. However, if customers withdrew over $250,000 from the exchange, they would have their claim reduced by 15% of the amount.
Future recoveries for customers and non-customers will be contingent on many variables, including the resolution of tax and governmental claims, the FTX team’s on-going asset recovery efforts, the results of avoidance action and other litigation and so on.
The FTX Debtors also anticipate that customers of both exchanges will not be paid in full. Here, greater percentage losses will be faced by customers of FTX.com. The proposal also talked about how the debtors could potentially exclude any “insiders, affiliates, customers” from the settlement who may have had knowledge of the commingling and misuse of customer deposits and corporate funds.
The chief executive officer and chief restructuring officer of the FTX Debtors, John. J. Ray III, called the amended proposal a “major milestone” as he was quoted saying: “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.
“I would especially like to recognize the important role of the independent Board of Directors who quickly responded to the call to duty at a time of crisis. They bring wisdom and guidance, often in the face of adversity, that has been and continues to be instrumental throughout the difficult process of bringing order and resolution to these cases.”
Former FTX CEO and founder of the collapsed crypto exchange, Sam Bankman-Fried, currently faces a court trial for allegedly misleading the exchange’s customers and defrauding lenders associated with his cryptocurrency hedge fund, Alameda Research.
Starting about two weeks ago, the trial has seen multiple witnesses taking the stand including former FTX developer, Adam Yedidia, FTX co-founder, Gary Wang and former Alameda Research CEO and Sam Bankman-Fried’s one-time girlfriend, Caroline Ellison.
Star witness Ellison, who had pleaded guilty to fraud and conspiracy charges last year, testified saying that SBF had “directed” her to steal customer money and had instructed her “to use FTX funds but to keep money on FTX” in order to meet customer withdrawal requests.
