The team overseeing the bankruptcy process has put forward a new plan to distribute the remaining assets to affected creditors. The proposal aims to give back to creditors 90% of their stake at the time of FTX’s collapse.
cryptocurrency exchange ftx has submitted a revised proposal to return a large portion of the funds to creditors affected by the company’s bankruptcy last November.
Troubled FTX Exchange
FTX, once one of the largest crypto exchanges, has filed for bankruptcy protection after a liquidity crisis led to mass customer withdrawals. This left FTX unable to meet financial obligations, including returning customer assets held on the platform. The total amount missing is estimated to be around $9 billion.
The crisis began on Sunday, November 6, 2022, when rival exchanges Binance Announced that it will liquidate its entire FTX Token (FTT) holdings due to unspecified “recent revelations”. This gave a boost to the old-fashioned bank, with customers rushing to withdraw funds from FTX. More than $6 billion was withdrawn in just 72 hours. FTX struggled to raise emergency capital to cover the withdrawal. After a proposed acquisition deal from Binance failed, FTX and several affiliated companies filed for Chapter 11 bankruptcy.
New hope for FTX creditors
In a promising development, the team overseeing the bankruptcy process has introduced a new plan to distribute the remaining assets to affected creditors. The proposal aims to give back to creditors up to 90% of their stake at the time of FTX’s collapse. The debtors intend to formally file the proposal in the US Bankruptcy Court by December 16, 2023. If approved, it would facilitate the withdrawal of billions of FTX users who have seen their funds disappear overnight.
The revised proposal suggests dividing the missing client assets into three separate pools: FTX.com client assets, FTX.US client assets, and a common pool for other assets. The purpose of this classification is to simplify distribution.
John. Chief Executive Officer and Chief Restructuring Officer of FTX Debtors J. Ray III expressed his thoughts about the repayment move, saying, Said,
“The proposed resolution of the client asset issues is another major milestone in our case. Together, triggering the most challenging financial disaster I have seen, debtors and their creditors have created enormous value from a situation that could have easily resulted in a near total loss for customers.
Terms on payment of FTX creditors
While creditors can recover up to 90% of holdings, certain conditions apply, allowing customers who withdrew less than $250,000 from FTX in the 9 days prior to bankruptcy (called a “preference settlement”) to have their claim settled without reduction. Can accept. In general, all creditors will receive a “shortage claim” from the common pool to account for the missing assets. However, obstacles such as taxes and government claims may ultimately affect the amount creditors receive.
Additionally, debtors reserve the right to exclude certain parties from the settlement, such as insiders and associates involved in the commingling of funds. Those who manipulated KYC to facilitate withdrawals on halving may also be excluded.
The path forward remains complex, but the proposal is an important step forward for creditors upset by FTX’s surprise collapse. With a revised plan now on the table, creditors can expect to recoup a large portion of the stake lost in the chaotic bankruptcy.
Temitope is a writer with over four years of experience writing across various fields. He has a special interest in the Fintech and Blockchain sectors and enjoys writing articles in those areas. He has bachelor’s and master’s degrees in linguistics. When he’s not writing, he trades Forex and plays video games.
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