A recent development in the case of FTX, a cryptocurrency exchange that collapsed in November 2022, is the approval granted by a US bankruptcy court to solicit votes on a liquidation plan. This plan involves paying customer claims in cash, based on crypto prices at the time of FTX’s collapse. Despite objections from some customers who are seeking higher amounts due to the rise in crypto prices, the court has approved the cash payment plan.
Customers who held cryptocurrencies with FTX in 2022, such as Bitcoin, would receive a fixed amount under the liquidation plan, which may be lower than the current value of the assets. Creditors have raised concerns over this difference and have objected to the plan, arguing that FTX is exaggerating the potential for a full recovery with interest.
FTX CEO, John J. Ray III, has responded to the objections by stating that it is impossible to return the exact amount of crypto assets deposited by customers, as the company had a shortfall at the time of its bankruptcy. Ray emphasized that FTX cannot give back tokens that were never in their possession, as the company held only a small percentage of the total Bitcoin and Ethereum shown in customer balances.
FTX will accept votes on the liquidation plan until August 16 and seek final approval on October 7. The plan aims to provide customers with access to the total amount owed within 60 days of approval, with a faster payment option available for claims under $50,000. Despite objections from some creditors demanding appreciated value, Ray has stated that increasing amounts owed to certain customers would result in taking money away from fellow customers.
According to reports, FTX has $11.4 billion in assets and has the potential to increase this amount to $12.6 billion by the end of October. The company’s wind-down plans indicate that 98% of customers will receive their owed amount within the specified timeframe, with provisions in place to facilitate faster payments for smaller claims.
The approval granted to FTX by the US bankruptcy court highlights the complexities and challenges involved in liquidating a collapsed cryptocurrency exchange. While the liquidation plan may not meet the expectations of all customers, it represents a step towards resolving the outstanding claims and distributing assets in a fair and transparent manner.
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