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FTX plan approved: Victims to receive cash, not crypto
After waiting for two years, affected FTX users will get cash repayments from the defunct exchange.
- FTX got court approval to proceed with its reorganization plan.
- Some seemed unhappy with the FTX plan.
The US bankruptcy court has approved the reorganization plan of defunct crypto exchange FTX, ending a complex crypto bankruptcy case that began two years ago.
Judge John T. Dorsey of the US Bankruptcy Court District of Delaware approved the plan on 7th October, paving the way for the final distribution of funds to victims of the defunct FTX exchange.
FTX crypto exchange’s repayment plan
The plan sought to reimburse 119% of the claimed value to about 98% of former FTX users. John J. Ray III, the current CEO of FTX, hailed the approval as a ‘milestone’ for victims’ repayments.
“The Court’s confirmation of our Plan is a significant milestone on our pathway to distributing cash to customers and creditors.”
Ray added that the cash repayments will also include interest.
“Looking ahead, we are poised to return 100% of bankruptcy claim amounts plus interest for non-governmental creditors through what will be the largest and most complex bankruptcy estate asset distribution in history.”
FTX is projected to collect $14.7 – $16.5 billion to facilitate the repayments. According to a Bloomberg report, this fete was possible due to the ongoing bull market run, which boosted the value of some FTX assets like Solana [SOL].
FTX plan’s opponents
However, not everyone seemed happy with FTX’s plan. A week before Judge Dorsey’s approval, one of FTX’s customers objected to the plan and called for in-kind repayment based on crypto assets held by users.
For context, BTC has rallied about 4X since the 2022 winter after the FTX collapse.
As a result, some victims didn’t positively view the lack of in-kind repayment as they would be reimbursed on value equivalent to 2022 prices.
Bloomberg’s James Seyffart concurred with the victims’ objections and noted that adding interest couldn’t match the value if they were paid in-kind.
“Adding interest on the cash is great but it’s a rounding error compared to what the customer balances would actually be worth if they were paid out in-kind”
However, Judge Dorsey ruled out in-kind repayment. Legal experts familiar with the matter claimed that FTX didn’t have enough cryptocurrency assets to make in-kind repayments.
In fact, the defunct exchange reportedly didn’t have the crypto assets that customers thought it had.
Following the update, FTT, the native token of the defunct exchange, surged nearly 50% despite the judge’s Monday ruling that it was worthless.
That said, customer repayments will happen after FTX hires a firm to undertake the distribution process and other requirements. There were mixed views on whether the repayments could boost the crypto markets.
