In a breakthrough for creditors and customers of the bankrupt cryptocurrency exchanges FTX and FTX.US, a proposed settlement has been reached, offering a ray of hope for the return of their assets. The FTX debtors announced the milestone marking a significant step in their Chapter 11 bankruptcy case. Following extensive discussions with unsecured creditors, non-United States customers, and class action plaintiffs, this development offers the possibility of significant compensation to those affected by the bankruptcy.
The proposed settlement revolves around the concept of a “shortfall claim,” which has the potential to return approximately $8.9 billion to FTX.com customers and $166 million to FTX.US customers. This claim, subject to approval by the bankruptcy court, could see these funds disbursed by the end of the second quarter of 2024.
John J. Ray III, CEO and chief restructuring officer of FTX, expressed his satisfaction with the terms of the settlement, stating, “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.”
The proposed plan involves categorizing assets into three distinct pools: assets segregated for the benefit of FTX.com customers, assets designated for U.S. customers, and a general pool of other assets. Notably, the shortfall claim only applies to the first two groups, signifying a differential treatment in the distribution of assets.
FTX’s $9 billion payout plan
FTX’s amended plan emphasizes the division of assets into these three pools, with the expectation that the majority of the payout will go to customers of FTX.com. While the proposed settlement is promising for all customers, those with assets in FTX.com are likely to see a greater percentage of their losses recovered.
A noteworthy aspect of the proposed plan is the provision for customers who withdrew over $250,000 from the exchange within nine days of the bankruptcy. According to the plan, their claim would be subject to a 15% reduction of the withdrawn amount. However, customers with claims under $250,000 will not be subject to any reductions, as explained by FTX debtors.
“Eligible customers that have a preference settlement amount of less than $250,000 during the nine-day period would be able to accept the settlement without any reduction of claim or payment.”
While this proposed settlement offers a glimmer of hope for the affected customers and creditors, it is essential to remember that this is still a preliminary step. The official filing for court approval is expected to be submitted. The court’s decision will be instrumental in determining whether the proposed settlement is implemented.
The proposed settlement in the bankruptcy case of FTX and FTX.US offers a potential lifeline to customers and creditors who had faced the prospect of significant losses. The notion of a “shortfall claim,” estimated at $8.9 billion for FTX.com and $166 million for FTX.US, has raised hopes of over 90% of assets being returned to affected parties.
However, the final outcome rests with the bankruptcy court’s approval, and the official filing to that end is expected. The cryptocurrency community and the stakeholders involved will undoubtedly be closely following the developments in this case, as it could set a significant precedent for future situations involving cryptocurrency exchanges.
