Cryptocurrency exchange FTX, which filed for bankruptcy last month after a liquidity crunch, has put forward a plan to return billions of dollars to customers and creditors as part of the bankruptcy resolution process.
Details of the Proposed Plan
The proposed plan aims to distribute cash to FTX customers and creditors after liquidating the company’s cryptocurrency holdings. However, several critical questions remain unanswered, such as the plan’s impact on the potential revival of the FTX exchange and how to value certain digital tokens.
The plan is scheduled to be voted on by creditors in 2023 and requires final approval from U.S. Bankruptcy Judge John Dorsey. While major creditor and customer groups have agreed to the general structure of the repayment plan, specific details are still being finalized.
Crypto Asset Liquidation and Valuation
Billions in dollars will be distributed to customers and creditors as cash after FTX’s cryptocurrency holdings are liquidated. Customer claims will be valued based on the assets’ worth as of November 11, 2022 when FTX filed for bankruptcy. Specified conversion rates will be used to convert crypto assets into cash distributions.
However, cryptocurrency values like Bitcoin have surged significantly since FTX’s November bankruptcy filing, which could impact the final payout amounts for creditors.
Response from FTX Founder
FTX founder Sam Bankman-Fried faces criminal charges for fraud related to FTX’s collapse. He has a tentative sentencing date of March 28, 2024 and could face up to 20 years in prison. Bankman-Fried has reportedly handed control of the company to restructuring experts who are working to locate assets and address debts owed to customers and creditors.
Three other FTX executives — Caroline Ellison, Gary Wang, and Nishad Singh — are also expected to receive minimal prison time due to their cooperation with authorities, though they may still face penalties like restitution payments and forfeiture of ill-gotten gains.
The government claims that FTX customers incurred billions of dollars in losses, indicating a significant financial impact on the cooperating witnesses.