The Approval of FTX Liquidation Plan Sparks Controversy Among Creditors

Recently, a US bankruptcy court granted FTX approval to seek votes on a liquidation plan that would pay customer claims in cash. This plan would determine payments to customers based on crypto prices at the time of FTX’s collapse in November 2022. Despite objections from some customers who believe they are entitled to higher amounts due to the rise in crypto prices, the court has given the green light for FTX to move forward with the cash payment plan.

Customers have expressed dissatisfaction with the proposed cash payment plan, arguing that FTX is misleading them with promises of a “full recovery with interest.” Some creditors believe that the proposed payments do not accurately reflect the actual value of their holdings at the time of FTX’s collapse. For example, customers who held one Bitcoin with FTX in 2022 would receive $16,800 under the plan, instead of the current value of each BTC.

In response to the objections raised by customers, FTX CEO John J. Ray III defended the cash payment plan, stating that the company’s bankruptcy filing prevented them from returning the exact amount of crypto assets deposited by customers. Ray emphasized that FTX did not have possession of all the tokens that customers claimed, and therefore, it is not possible to distribute them accordingly.

FTX’s bankruptcy in November 2022 revealed that the company only held a small fraction of the Bitcoin and Ethereum shown in customer balances. Despite this shortfall, the company is optimistic that 98% of customers will receive their owed amounts within 60 days of the bankruptcy court’s approval of FTX’s wind-down plans. Additionally, customers with claims under $50,000 may have access to a faster payment option.

Reports suggest that FTX currently holds $11.4 billion in assets, with the potential to increase this amount to $12.6 billion by the end of October. As the company navigates through its liquidation process, it remains to be seen how creditors will react to the proposed cash payment plan and whether any further disputes will arise regarding the distribution of assets among customers.