US Bankruptcy Judge John Dorsey has given the green light to FTX’s bankruptcy plan, which will see customers receive billions as the bankruptcy proceeding nears its conclusion.
The approved bankruptcy plan will give former FTX customers a full refund, along with interest, a rare outcome in bankruptcy cases where unsecured creditors usually receive a fraction of what they are owed.
FTX Bankruptcy Plan Receives Court Approval
The judge approved the bankruptcy plan during a hearing in Wilmington, Delaware. The plan had already received overwhelming support from FTX creditors. The plan allows FTX to repay its former customers using $16 billion in assets recovered since its collapse.
“JUST IN: Judge approves FTX bankruptcy plan to fully repay crypto customers in cash with interest.”
The approved bankruptcy plan relies on several settlements with FTX customers, creditors, US government agencies, and liquidators appointed to wind down FTX’s operations outside the United States. The plan allows FTX to settle with its former customers first. Following this, it can potentially pay competing claims filed by government regulators. FTX will pay its customers at least 118% of the value of assets held in their accounts as of November 2022. However, the court still has to decide the date on which the settlement plan will be implemented.
Government bodies, including the Internal Revenue Service (IRS) and the Commodities and Futures Trading Commission, have agreed to suspend high-value claims against FTX until all creditors have been repaid. However, the IRS will receive $200 million upfront as part of the settlement.
Mixed Reactions From Customers
FTX raised additional funds by selling its assets, including investments in several tech companies. It announced that approval of the bankruptcy plan was a significant victory for creditors. However, customers had a mixed response to the developments, with many expressing their disappointment at the collapse of FTX, which led them to miss out on a strong recovery in the crypto markets. Many have also objected to the plan and demanded higher repayments, reflecting the recent surge in crypto prices.
With cryptocurrency prices significantly higher, creditors feel their claims will be far more valuable if they were tied to the current value of their holdings rather than their worth at the time of the bankruptcy filing. This has led to considerable frustration among FTX customers who feel they are still getting short-changed. Judge Dorsey called the case a model case in dealing with complex Chapter 11 bankruptcy proceedings, stating,
“I think this is a model case for how to deal with a very complex Chapter 11 proceeding. I applaud everyone involved in the negotiation process.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
