Bankrupt cryptocurrency exchange FTX has put forth a revised proposal aimed at returning as much as 90% of the assets owed to its creditors, who had holdings with the exchange prior to its collapse in November of last year.
The group overseeing the bankruptcy proceedings, representing the debtors, intends to formally submit this plan to a U.S. Bankruptcy Court for review by December 16, 2023.
Under this proposal, the missing customer assets will be divided into three distinct pools, each reflecting the circumstances at the onset of the Chapter 11 cases. These pools are designed for assets segregated for FTX.com customers, assets belonging to FTX.US customers, and a “General Pool” that includes other assets.
According to the proposal, customers with a preference settlement amount of less than $250,000 will be able to accept the settlement without experiencing any reduction in their claims or payments. The preference settlement is defined as 15% of customer withdrawals on the exchange, which were recorded nine days prior to the exchange’s collapse.
Creditors are expected to receive a “Shortfall Claim” from the general pool, equivalent to the estimated value of the missing assets from the exchange. These missing assets are estimated at nearly $9 billion for FTX.com and $166 million for FTX.US, the U.S. branch of the exchange.
However, the actual recovery for creditors could be influenced by various factors, including tax liabilities, government claims, fluctuations in token prices, and other variables.
In addition, the debtors may choose to exclude certain parties, such as insiders, affiliates, and customers, from the settlement if there is evidence that they were aware of the improper use of customer deposits and corporate funds, or if they altered their KYC information to expedite withdrawals when withdrawals were restricted.
The debtors have emphasized that the payouts for these excluded parties might not accurately reflect the fair value of the FTX Debtors’ claims.
FTX’s downfall last year was triggered by the release of concerning information regarding its financial status by CoinDesk. The new CEO, John J. Ray III, has criticized the financial controls at the company, while the founder, Sam Bankman-Fried, is currently facing legal proceedings.