FTX debtors have agreed to a reorganization plan that will outline the roadmap of how to repay billions of dollars to the customers and creditors of the infamous crypto exchange.
FTX debtors are the official committee of the unsecured creditors and other creditor stakeholders that has been working to work out a plan on how to tackle the current financial and legal obligations after the firm declared bankruptcy due to the whole Sam Bankman-Friend and Alameda Research saga.
The debtors have filed a statement in which they disclosed their intent to the bankruptcy court before a planned hearing to take place in 2024.
It is essential to note that these plans have not been approved yet and have one very glaring point in it that states that the debtors will honour claims according to the prices of the assets on November 11, 2022, and not at the current exchange rate.
What this means that if someone is going to get reimbursed for their lost Bitcoins, then they will be given the reimbursed amount at the value of $17000, which was the price of Bitcoin when FTX filed for Chapter 11 bankruptcy and not $44000, which is the current price of Bitcoin at the time of writing this article.
The committee for the unsecured creditors has released a statement on the official FTX X(formerly Twitter) account in which they stated that their goal is to continue to recover the maximum possible amount that the firm lost for their creditors and to seek clearance for the distribution of those funds back to them.
One important point to note here is that according to the committee, the current plan is still open for revision, provided there are any recommended amendments proposed by the committee and other stakeholders. The proposed changes can be made at any time for events that occur between now and the official date of the hearing.
In October, those managing FTX’s bankruptcy disclosed a proposed resolution for customer property disputes, potentially enabling customers to receive approximately 90% of the Distributable Value Worldwide if the revised plan is accepted.
The statement emphasized that the plan, believed by the debtors to provide the best recovery for claim holders, may face liquidation under Chapter 7 of the Bankruptcy Code if not confirmed by vote or court approval.
Presently under Chapter 11 bankruptcy, FTX has the flexibility to reorganize, but a potential Chapter 7 scenario would involve selling all assets to settle creditor claims. The disclosure statement cautioned that estimated claim amounts in certain classes might exceed projections, potentially leading to substantial reductions in distribution values.
The bankruptcy court, given creditor acceptance, can confirm the plan. Alternatively, in the absence of acceptances, a cram-down route is available.
In bankruptcy law, a cram-down refers to the ability of a bankruptcy court to impose a reorganization plan on creditors even if they do not agree to it. This typically happens when one or more classes of creditors reject the proposed plan, but the court believes that the plan is fair and equitable.
FTX’s debtors are resisting a $24 billion IRS claim, arguing it could hinder recoveries for victims. They contend, in a filing on December 11, that the IRS’s reliance on its processes lacks a basis, causing unnecessary delays in distributions to those genuinely affected.
Before the proposed plan, FTX’s debtors obtained approval in September to sell the digital assets of the bankrupt exchange.
There is also a discussion going around in the crypto community in which many are wondering whether the FTX crypto exchange will be restarted again, and many influencers are asking people around whether or not they would feel confident to return to the platform that was responsible for one of the biggest shakedowns in the cryptocurrency history.
