FTX's bankruptcy process has reached a significant milestone as a US judge has approved the reorganization plan, marking the conclusion of legal proceedings that followed the exchange's collapse two years ago due to fraud allegations.
Judge John Dorsey, presiding in the U.S. Bankruptcy Court for the District of Delaware, approved the plan during a hearing on Monday, initiating the process of distributing funds to creditors. Under this plan, 98% of creditors are set to receive at least 118% of their claim value in cash.
Approximately 94% of creditors within the “dotcom customer entitlement claims” class, representing claims valued at around $6.83 billion, voted in favor of the reorganization plan, as reported by The Block.
However, the plan faced criticism from Sunil Kavuri, a representative of the largest FTX creditor group, who argued that cryptocurrency should be paid out in-kind rather than in cash. David Adler, a lawyer for some creditors, voiced concerns about potential significant tax implications for those receiving cash payouts.
During the hearing, Adler questioned Alvarez & Marsal North America's managing director, Steven P. Coverick, about FTX's attempts at in-kind distributions. Coverick confirmed that the topic was extensively discussed but ultimately excluded from the plan. He stated, “The debtors do not have cryptocurrency required for in-kind distributions.”
Judge Dorsey later objected to in-kind distributions and reaffirmed that the value of FTT, the exchange's native token, is currently zero. He remarked, “I have no evidence today that the value of FTT tokens would be anything other than zero.” This sentiment reflects the ongoing challenges facing the FTX brand.
Although discussions regarding a potential FTX 2.0 were initiated, they were ultimately dismissed. In June 2022, FTX CEO John J. Ray III indicated that they were soliciting interest for a reboot of the FTX.com exchange. However, by January, FTX lawyer Andrew Dietderich informed the judge that no investors were willing to commit capital for a restart.
FTX filed for bankruptcy in late 2022, and its former CEO, Sam Bankman-Fried, was convicted of multiple criminal charges in November 2023, resulting in a nearly 25-year prison sentence. Additional legal repercussions followed for the sister trading firm Alameda, with its CEO Caroline Ellison receiving a two-year sentence for her involvement.
Disclaimer: This article is for informational purposes only and should not be treated as legal, tax, or investment advice.
