News & Analyses

FTX files consensus-based plan of reorganization, awaits bankruptcy court approval

FTX Trading and its affiliated debtors today filed their anticipated amended plan of reorganization.

  • 98% of creditors receive at least 118% of allowed claims within sixty days of effectiveness, others get billions in compensation.
  • Plan would resolve disputes with government and private stakeholders without costly and protracted litigation.
  • FTX creditors receiving their investment back could mean massive liquidity injection into crypto markets, FTT rises a fraction.

FTX exchange has shared a compensation plan for its customers and creditors. Though still pending bankruptcy court approval, execution of the plan could mean massive liquidity for the industry.

Also Read: Solana price dumps 21% on week as round three of FTX estate sale of SOL commences

FTX shares creditor compensation plan

FTX has filed a consensus-based plan for its reorganization, coming almost two years (nearly 17 months) after the now defunct FTX filed for Chapter 11 Bankruptcy Protection in the District of Delaware.

Thanking every stakeholder and expressing intention to “return 100% of bankruptcy claim amounts plus interest for non-governmental creditors,” John J. Ray III, Chief Executive Officer and Chief Restructuring Officer of FTX, said:

On behalf of FTX’s independent Board of Directors, I want to extend our deepest appreciation[ …]Finally, I want to thank all the customers and creditors of FTX for their patience throughout this process.

The plan has two key highlights for its customers and creditors:

  • “98% of FTX creditors to receive at least 118% of allowed claims in cash within 60 days of effectiveness.
  • Other creditors to receive 100% of allowed claims plus billions in compensation for the time value of their investments.”

The plan would resolve disputes with governmental and private stakeholders without costly and protracted litigation.

Subject to being finalized and approved by the Bankruptcy Court, the plan details how the exchange intends to distribute to customers and other creditors “virtually all of the assets associated with FTX at the time of its collapse in November 2022.” This means they will be compensated at 2022 crypto prices regardless of the price of the assets now.

In this contemplation, FTX is working with between $14.5 and $16.3 billion. This comprises totals of property collected valuation, converted to cash and available for. Specifically:

  • Assets under the control of the chapter 11 debtors.
  • Assets under the control of the Joint Official Liquidators of FTX Digital Markets, Ltd. (Bahamas), the Securities Commission of The Bahamas, the Joint Official Liquidators of FTX Australia, the United States Department of Justice and dozens of private parties that have cooperated in the recovery efforts.

Bloomberg says FTX has amassed billions of dollars more than it needs to cover what customers lost in its November 2022 collapse. This positions the firm to receive full recoveries under the company’s bankruptcy.

Creditors receiving their payouts would be bullish for crypto in general, as it would signify a lot of liquidity in the market.

In the immediate aftermath of this news, FTX token FTT rose by almost 2% to trade for $1.66 at the time of writing.

FTT/USDT 2-hour chart

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