The Controversy Surrounding FTX’s Liquidation Plan

A US bankruptcy court recently approved FTX’s proposal to solicit votes on a liquidation plan that involves paying customer claims in cash. This plan is based on crypto prices at the time of FTX’s collapse in November 2022, which has sparked controversy among customers seeking higher payouts due to the rise in crypto prices since then.

Objections from Creditors

Despite the approval of the cash payment plan, some creditors have raised objections. They argue that FTX is overstating the benefits of the plan by claiming it offers a full recovery with interest. These creditors believe that customers should be made aware that the supposed full recovery is not as substantial as FTX claims.

Impact on Customers

If the cash payment plan is implemented, customers who held one Bitcoin with FTX in 2022 would receive $16,800 instead of the current market value of each BTC. This significant difference has caused concern among creditors since May, as they feel that customers are not receiving the full value of their investments.

FTX CEO John J. Ray III defended the cash payment plan by stating that the company’s bankruptcy filing left them unable to return the crypto assets deposited by customers. Ray emphasized that FTX only held a small percentage of the Bitcoin and Ethereum reflected in customer balances, making it impossible to provide higher payouts to certain creditors.

Despite the controversy, past developments indicate that 98% of customers will receive the total amount owed within 60 days of the bankruptcy court’s approval of FTX’s wind-down plans. Additionally, a faster payment option will be available for customer claims under $50,000, ensuring quicker access to funds for those with smaller balances.

FTX’s Financial Standing

Recent reports suggest that FTX has $11.4 billion in assets, with the potential to increase this amount to $12.6 billion by the end of October. This financial stability may play a role in determining the final payouts to customers and creditors, as well as the overall success of FTX’s liquidation plan.

The controversy surrounding FTX’s liquidation plan highlights the complexities of balancing customer claims with the company’s financial constraints. While the approval of the cash payment plan may not fully satisfy all stakeholders, FTX’s efforts to address creditor concerns and expedite payment timelines demonstrate a commitment to resolving the liquidation process fairly.