FTX Creditors Contribute to Decision-Making Process for Repayment Strategy
Failed cryptocurrency exchange FTX is currently seeking input from creditors regarding a proposed liquidation plan aimed at settling debts to compensate affected customers. Delaware judge John Dorsey granted permission on Thursday for FTX’s bankruptcy advisors to initiate the creditor voting process, with the objective of gathering opinions from individuals not previously consulted on the repayment strategy.
According to reports by Bloomberg, FTX plans to potentially offer customers a reimbursement equivalent to 119% of their holdings as of the date FTX declared Chapter 11 bankruptcy. Documents submitted to the court indicate that other debtors may receive a sum reaching up to 143% of the assets owed to them.
Despite objections from a minority of customers demanding higher refunds due to recent surges in cryptocurrency values, FTX attorney Andy Dietderich emphasized that bankruptcy regulations necessitate assessing claims based on the circumstances at the time of the company’s collapse, irrespective of subsequent market fluctuations.
Dietderich estimated that the process of untangling FTX’s financial affairs could incur costs amounting to hundreds of millions of dollars.
Moving a step closer towards finalizing a reorganization blueprint symbolizes a significant milestone in bringing closure to the extended two-year-long FTX saga.
Moreover, FTX is engaging in discussions with federal authorities with the aim of utilizing government claims against the company to offset losses incurred by customers. Recently, FTX settled a $24 billion tax claim raised by the US Internal Revenue Service in December 2023.
Customer Dissatisfaction with FTX’s ‘Complete Repayment’ Pledge
Despite FTX’s commitment to fully reimburse customer claims along with accrued interest, a segment of FTX customers contests this assurance, arguing that the company’s assessments are rooted in cryptocurrency values from November 2022.
Critics claim that FTX’s proposed voting strategies are designed to deceive customers by overly promoting the notion of a complete refund with interest, as reported by Reuters.
John Ray, the current CEO of FTX who assumed leadership following Sam Bankman-Fried’s removal, refuted claims suggesting that FTX intends to solely return the same cryptocurrencies deposited by customers. Ray alleged that these assets have been depleted and misappropriated by Bankman-Fried, who faces a potential 25-year prison sentence.
Ray advocated for compensating customers in cash, emphasizing the volatile nature of various cryptocurrency assets held by customers since FTX’s insolvency.
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