A recent filing in the FTX bankruptcy case indicates that a court hearing to confirm the reorganization plan will be held on October 7.
Prominent blockchain reporter Colin Wu confirmed the development today, detailing how creditors of the bankrupt exchange may receive compensation if the court approves the plan.
Payment Schedule
If approved, Colin Wu noted that creditors with less than $50,000 claims could start receiving payments by the end of 2024. This timeline aligns with reports indicating that the bankrupt exchange could commence repaying $16 billion to creditors in the fourth quarter.
While creditors with less than $50,000 claims could be repaid before the end of 2024, Colin Wu noted that those with larger claims may not get their payments until 2025, specifically in the first or second quarter.
FTX Reorganization Plan
In May, FTX debtors’ estate, led by legal counsels from Sullivan and Cromwell, proposed a reorganization plan under which 98% of the exchange’s creditors will receive a minimum of 118% of their claims in cash.
The plan noted at the time that payment would commence within 60 calendar days of the court’s approval. Therefore, if the court approves the reorganization plan by October 7, repayment could commence anytime before December 7.
Creditors to Receive Less Than Their Crypto Value
Although the original reorganization plan indicates that 98% of FTX creditors could receive 118% of their claims in cash, Sunil Kavuri, a representative of one of the exchange’s creditors groups, stated that customers could receive around 25% of their crypto holdings.
According to Kavuri, FTX debtors estimated bankruptcy claims using the value of cryptos at the time. When FTX officially filed for bankruptcy, Bitcoin (BTC) was trading at around $16,000. However, the price of the premier asset has surged to $64,501.
With creditors expected to be paid in cash, anyone who lost 0.5 BTC in the bankruptcy will receive around $8,000 in cash when repayment commences, instead of the $32,250 they would have received if claims were paid in kind.
New Document Shows FTX to Allocate $230M to Shareholders
In a surprising move, a new document suggests that debtors of defunct crypto exchange FTX agreed to allocate up to $230 million from government forfeiture proceeds to preferred shareholders.
Notably, this agreement was executed on August 28 between FTX debtors and some holders of preferred equity interest. However, it became public on September 27 through a court filing.
According to the agreement, FTX debtors are required to allocate 18% of all government forfeiture proceeds, totaling $230 million, to a special fund dedicated to shareholders.
It bears mentioning that this provision contradicts what is obtainable during bankruptcy proceedings. Bankrupt firms traditionally reimburse creditors before catering to shareholders’ needs.
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