FTX Derivatives Exchange is preparing to distribute up to $16 billion in assets to creditors following its bankruptcy. The firm has recently updated its reorganisation plan to potentially offer full repayment, which may include the principal amount of bankruptcy claims plus interest for non-governmental creditors. The total value of assets to be distributed is estimated between $14.5 billion and $16.3 billion. This sum includes both FTX’s Chapter 11 assets and those managed by various entities, including the Joint Official Liquidators of FTX Digital Markets Ltd (Bahamas) and the Securities Commission of The Bahamas.
The confirmation hearing for FTX’s reorganisation plan is scheduled to start on October 7, 2024. As this date approaches, there are growing concerns about a potential market impact similar to the Mt. Gox situation. Investors fear that the distribution of such a significant amount of assets might lead to a large-scale selloff, affecting the prices of digital assets.
Read more: FTX and CFTC settle for $12.7 billion, paying creditors in full
Mt. Gox Bitcoin Distribution: Market Fluctuations and Impact on Cryptocurrency Prices
The Mt. Gox exchange, which collapsed in 2014, provides a cautionary example. In May, Mt. Gox distributed over 140,000 bitcoins, worth approximately $9 billion, to creditors. This distribution led to substantial market fluctuations. CryptoQuant’s Head of Research, Julio Moreno, noted that the outflows from Mt. Gox addresses to exchanges preceded a bearish turn in the market, with Bitcoin’s price and other digital assets like Bitcoin Cash experiencing declines.
German Bitcoin Sales and Market Reactions
The German government’s sale of Bitcoin further exemplifies the potential market impact of large-scale asset distributions. The government transferred significant amounts of Bitcoin to exchanges, including $350 million and later $615 million worth of BTC. These sales caused market instability and affected Bitcoin’s price, contributing to a broader trend of market volatility following substantial cryptocurrency dumps.
Read more: Former FTX executive Ryan Salame withdraws plea plea to criminal charges related to FTX collapse
FTX’s Restructuring Plan Under Scrutiny: SEC Concerns and CFTC Settlement Impact
FTX’s restructuring plan faces scrutiny from US regulatory bodies. The US Securities and Exchange Commission (SEC) has expressed concerns about FTX’s proposal to use stablecoins for creditor payments, stating it will not comment on the plan’s compliance with federal securities laws. Additionally, the US Trustee has opposed certain elements of the bankruptcy plan, such as a discharge clause that would absolve FTX debtors from future legal claims by creditors.
On a positive note, FTX and its affiliate, Alameda Research, have reached a settlement with the US Commodity Futures Trading Commission (CFTC). The firms have agreed to pay $12.7 billion to creditors, which could influence the final outcome of the restructuring plan.
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