FTX's repayment plan has caused extreme dissatisfaction among creditors. Large creditors may not receive compensation until the second half of next year

The restructuring team of bankrupt cryptocurrency exchange FTX announced in August that creditors had overwhelmingly voted to approve its repayment plan. The FTX liquidation team will hold a confirmation hearing starting on October 7, Eastern Time (starting late at night on the 7th, Beijing time).

Previously, the final voting results were submitted to the Bankruptcy Court of Delaware in the United States. After the plan is approved by the court, the repayment process is expected to start within 60 days at the earliest.

Now, the confirmation hearing of the FTX repayment plan is about to begin. Judge John T. Dorsey of the U.S. Bankruptcy Court in Delaware will decide whether to approve the plan.

If approved, small creditors with claims less than $50,000 are expected to Compensation payments will begin before the end of 2024, and creditors with larger claims may have to wait until the first or second quarter of 2025 to receive compensation payments.

How much compensation can creditors receive?

According to a reorganization plan FTX filed with Delaware Bankruptcy Court in May, once the sale of all assets is completed, the company estimates it will have as much as $14.5 billion to $16.3 billion in cash available for distribution that it owes customers and others. Non-governmental creditors are approximately US$11.2 billion.

Depending on the type of creditor's claim, some creditors can receive 142% of the loss compensation, and the vast majority of customers (creditors with holdings of less than US$50,000) can receive about 118% of the loss compensation.

These 98% of creditors will be able to receive it under the plan. After the court approved it, 118% of the loss compensation was obtained within 60 days.

However, it should be noted that the loss compensation is calculated based on the US dollar price of cryptocurrency on the day FTX exercised Chapter 11 of the Bankruptcy Law on November 11, 2022, so unless the assets placed by the user on FTX are stable coins, in fact Still a big loss.

For example, when FTX filed for bankruptcy protection, the price of Bitcoin was only about US$16,000, but the current price of Bitcoin is close to US$64,000. This means that if the creditor held a Bitcoin in FTX at that time, he might only get back 16,000. dollars, only a quarter of the current price.

Related reading：Caroline Ellison, caught in FTX scandal, may be spared jail sentence

Creditors' heavy losses spark dissatisfaction

Therefore, when FTX creditor representative Sunil Kavuri tweeted at the end of last month to disclose the latest revised bankruptcy document stating that creditors will actually only receive "10% to 25% of the value of its cryptocurrency," many creditors were disappointed, and even dissatisfied.

Sunil Kavuri and his followers are not the only opponents of FTX's repayment plan. In August 2024, a U.S. trustee responsible for overseeing the bankruptcy process also questioned the FTX restructuring plan, believing that the plan was the management of the FTX restructuring team. Persons and representatives provide too much legal protection.

In addition, according to the current plan of the restructuring team, FTX will repay creditors in cash or US dollar-linked stablecoins. However, the U.S. Securities and Exchange Commission (SEC) has previously stated that if FTX chooses to repay customers with stablecoins, it may oppose the FTX restructuring plan regardless of How? It is expected that there will be further answers after the hearing on October 7.

Related reading：Former FTX executive Ryan Salame withdraws plea plea to criminal charges related to FTX collapse

Repayment plans frequently controversial

In fact, recent disputes about the repayment plan have continued to surface. According to an agreement disclosed by FTX in late September, FTX will preferentially distribute 18% of the proceeds from government forfeiture actions, equivalent to US$230 million, to preferred shareholders. , this move once again aroused strong dissatisfaction among creditors.

Many creditors denounced this move as unfair and even "criminal" considering the huge financial losses they suffered, because in bankruptcy proceedings, creditors usually receive compensation before shareholders, and when they on August 16 The agreement was not known to exist when the repayment plan was voted overwhelmingly ahead of the voting deadline.

However, in response to this dispute, the FTX restructuring team recently stated that the U.S. Department of Justice will be responsible for mediating the claims of both parties, and emphasized that preferred shareholders are also regarded as victims of FTX’s fraudulent activities and have the same status as creditors.