FTX and FTX.US, both embroiled in bankruptcy, have taken a significant step toward resolving their customer asset disputes.
A proposed settlement has been reached between FTX creditors and debtors, potentially returning over 90% of assets to customers by the second quarter of 2024.
On October 17, FTX debtors announced a “major milestone” in their Chapter 11 case following extensive discussions with various parties, including the unsecured creditors’ committee, non-U.S. customers, and class action plaintiffs, all related to customer property disputes.
While an information-only notice of the proposed settlement was filed with a Delaware-based U.S. bankruptcy court on October 16, the official filing for court approval is expected by December 16.
Central to the amended plan is the “shortfall claim,” which estimates that customers of FTX.com and FTX.US will collectively receive approximately 90% of the available assets.
This claim is valued at around $8.9 billion for FTX.com and $166 million for FTX.US.
Pending approval, these funds are anticipated to be distributed by the end of the second quarter of 2024.
FTX CEO and Chief Restructuring Officer John J. Ray III expressed satisfaction with the settlement terms, stating that it has transformed what could have been a near-total loss for customers, especially given the challenging financial circumstances.
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The plan divides assets into three pools, specifically designated for FTX.com customers, U.S. customers, and a general pool of other assets.
However, only the first two groups are included in the shortfall claim, suggesting that customers of both exchanges will not receive full payments, with FTX.com customers likely to bear a higher percentage of losses.
A noteworthy aspect of the proposed plan addresses customers who withdrew over $250,000 from the exchange within nine days of bankruptcy.
These customers may face a 15% reduction in their claims. However, claims under $250,000 will remain unaffected.
FTX debtors clarified that eligible customers with preference settlement amounts below $250,000 during the nine-day period would receive the settlement without any claim reduction.
Additionally, as part of the amended plan, FTX may exclude insiders, affiliates, and customers with knowledge of the misuse of customer deposits and corporate funds from the settlement.
Notably, former FTX CEO Sam Bankman-Fried is currently facing a fraud trial linked to FTX’s bankruptcy last November.
The outcome of this trial could also impact the ongoing bankruptcy proceedings.
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