A US Judge John Dorsey has approved the FTX’s bankruptcy plans bringing to an end proceedings, two years after the exchange collapsed over alleged misconduct and fraudulent activities.
During a Monday hearing, Judge Dorsey decided to approve the reconstruction plan paving the way for the redistribution of funds to creditors. The move will allow the exchange to repay its clients using the $16 billion in assets that were recovered since the crypto exchange’s demise.
FTX’s bankruptcy case becomes a model case
During a hearing in Wilmington, Delaware on Monday, the US Bankruptcy Judge gave a nod to the plan saying FTX’s success made it “a model case for how to deal with a very complex Chapter 11 bankruptcy proceeding.”
According to the plan, 98% of the creditors are expected to receive at least 118% of their claim values in cash. Despite the approvals, the plan also received a fair share of criticism from a representative of exchange’s largest creditor group known as Sunil Kavuri.
Kavuri has argued that the FTX must pay cryptocurrencies in kind as opposed to the dollar value when the crypto exchange filed for bankruptcy in 2022.
A lawyer who has been representing four creditors, David Adler, has also indicated before the courts that creditors would get a significant tax bill if they were to receive their funds in cash as opposed to in kind.
He also cited the price of bitcoin as an example which has increased to more than $63,000 compared to $16,000 recorded in 2022 when the exchange filed for bankruptcy.
Adler went on to enquire with Alvarez & Marsal North America, LLC managing director Steven Coverack about FTX’s attempts to make in-kind distributions. Coverack reportedly indicated the issue had been discussed at length earlier, adding in-kind distributions were not part of the plan.
“The debtors do not have cryptocurrency that would be required to make in-kind distributions and, in fact, never had the cryptocurrency and the proportions in which customers believed they had in their accounts.”
Coverack.
However, during Monday’s hearing, Judge Dorsey objected to this allowing for in-kind distribution.
“I have no evidence today that the value of FTT tokens would be anything other than zero,” said Judge Dorsey adding that there was no basis for the token to increase in value, since the debtor would not revive the exchange.
*JUDGE APPROVES FTX BANKRUPTCY PLAN, CLEARING PATH TO REPAYMENTS
Source: DB
— db (@tier10k) October 7, 2024
FTX’s clients respond to the news
The news of the approval of the bankruptcy plan was received with mixed reactions with other clients disappointed that the exchange’s demise had made them miss out on the rebound in the crypto markets.
Responding to a post on X platform, some clients said this was good news while others mockingly said they couldn’t wait get their 50 cents.
Another client said this would not “bring in the buys people are hoping for.”
“If you truly believe the 16B that bought coins when $BTC was at $20k will put their money straight back to crypto above 60k you are pretty dumb,” reads another response from TraderAG.
However, FTX said this was a victory and good news for the company’s creditors, saying this had been made possible by its ability to recover cash and crypto assets which had gone missing when the company collapsed.
FTX also raised more funds by disposing some assets including investments in companies like Anthropic.
“Today’s achievement is only possible because of the experience and tireless work of the team of professionals supporting this case, who have recovered billions of dollars by rebuilding FTX’s books from the ground up and from there marshaling assets from around the globe.”
FTX CEO John Ray.
FXT filed for bankruptcy in late 2022 and nearly a year later its exchange CEO Sam Bankman-Fried was charged and found guilty of seven criminal counts. These included two counts each of wire fraud and conspiracy to commit wire fraud and he was slapped with a 25-year jail term.
The company’s trading associate Alamenda subsequently fell as its CEO Caroline Ellison was slapped with a two-year jail term over her role in FTX’s fault.
Ellison was arrested together with former FTX’s executive Gary Wang and Nishad Singh.
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