FTX pursues $175 million settlement with Genesis
- FTX sought resolution in legal dispute through a $175 million settlement with Genesis entities.
- Persistent discord surrounded the proposal, as the FTX 2.0 coalition highlighted unfavorable dynamics.
FTX and affiliated debtors formally sought court approval to address a substantial disagreement with Genesis entities, which involves claims totaling nearly $176 million, largely arising from customer claims against FTX and its affiliates.
The catalyst for this settlement motion is tied to the lifeline extended to the FTX platform. However, FTX creditors expressed discontent with the terms and implications of the settlement, urging the Official Committee of Unsecured Creditors of FTX (UCC) to contest it. They emphasized that Alameda’s transfer of significant FTX customer funds to Genesis in 2022 adds complexity that can’t be ignored.
Persistent discord and unfavorable dynamics surround the proposal
This sentiment mirrors concerns about Alameda, facing a $140 million avoidance claim and an outstanding loan claim of about $40 million. Bankruptcy regulations also come into play through claims under section 502(h) of the Bankruptcy Code, influencing permissible FTX claims. FTX asserts that potential recoveries from Genesis debtors and affiliated entities remain uncertain.
Hence, FTX sees a settlement as the pragmatic course to preempt conflicts. FTX’s CEO, John Ray III, adds support, advocating for a resolution aligned with both parties’ interests.
However, discord persists. On 17 August, the FTX 2.0 Coalition underscored the unfavorable nature of FTX’s proposal. The coalition notes Genesis claims outvaluing FTX’s, exacerbated by Genesis lender balances boosted by interest, including from lending to Alameda.
FTX asks court to settle Genesis dispute for a $175 million Genesis claim, the release of a $175 million customer claim and (near worthless) Alameda claims.
Down from first $3.9 billion to $2 billion asserted, this must be the worst deal to date, especially in light of the new… pic.twitter.com/ipxHuWMU4A
— FTX 2.0 Coalition (@AFTXcreditor) August 17, 2023
Anticipating dissent, the coalition foresees UCC’s reservations due to Alameda diverting substantial FTX customer funds in 2022 to repay Genesis. These funds, the coalition argues, rightly belong to FTX’s customers and are central to the ongoing debate.
FTX’s proposed settlement development highlights cryptocurrency’s intricate nature, entwining legal complexities with financial considerations. As stakeholders navigate these complexities, the industry watches, observing how this legal endeavor affects FTX, creditors, and the wider digital asset sector.