Bankrupt cryptocurrency exchange FTX’s creditors are now faced with the choice of receiving assets in cash or cryptocurrency.
A document from the bankruptcy court in Delaware, USA, shows that Judge John Dorsey has approved the bid package and ballots required for the exchange’s clients to communicate their preferences. The voting deadline is August 16th, and Judge Dorsey will make a ruling on the matter in early October.
FTX’s proposed restructuring plan aims to repay creditors the dollar value of their cryptocurrency assets at the time of the exchange’s collapse, either in cash or cryptocurrency. The bankruptcy estate plan offers a 118% return to 98% of creditors with claims below $50,000. Additionally, non-governmental creditors will receive 100% of their claims and may receive an additional 9% interest from the time of FTX’s collapse.
The troubled cryptocurrency trading platform also revealed that it has accumulated funds exceeding the amount required to repay affected parties. Although creditors suffered losses of around $11 billion when FTX went bankrupt in 2022, the company has generated over $16 billion in proceeds through the consolidation of funds and the sale of assets, including properties owned by former FTX executives.
When FTX ceased withdrawals and collapsed in November 2022, the trading price of Bitcoin (BTC) was around $16,000. However, as of the time of writing, the value of cryptocurrency has surpassed $61,000, an increase of 281% since then. In addition to BTC, the total market value of cryptocurrencies has more than doubled since November 2022, rising from $1 trillion to $2.27 trillion, indicating a rise in other cryptocurrencies, including popular altcoins.
FTX creditors object to the plan
Considering the growth of the cryptocurrency market in the past 20 months, FTX creditors argue that receiving the cash value of their holdings at the time of the collapse would be unfair. However, FTX’s lawyers argue that the proposed plan complies with bankruptcy law, which requires the exchange to repay claims based on their value when filing for Chapter 11.
Furthermore, FTX’s lawyers insist that implementing the cash repayment plan would ensure that creditors do not have to pay capital gains tax.
Meanwhile, FTX creditors, led by activist Sunil Khawari, have raised objections to the proposed plan earlier this month. They argue that the plan fails to meet certain requirements of the Bankruptcy Code, including property issues, consistent debtor liquidation analysis, and satisfying the best interest test.
