FTX Debtors Commit to 90% Value Return amid Bankruptcy

ByGavin Cole

Oct 17, 2023

FTX Debtors are offering a silver lining to their customers amidst the ongoing Chapter 11 case. In a recent filing, they announced an impactful settlement regarding customer property disputes. 

By the second quarter of 2024, pending bankruptcy court approval, customers can anticipate recovering over 90% of global value. This promising development is part of the Amended Plan of Reorganization, which FTX is slated to file by December 2023.

Navigating the Settlement Pathway

FTX Debtors, embroiled in ongoing Chapter 11 cases, have stepped forward with a blueprint designed to untangle the web of customer property disputes. Announced on October 16, this move is not just a strategy but an assertion of commitment to ensuring that customers are not left in the lurch. 

The Amended Plan of Reorganization, anticipated to be filed by December 2023, encapsulates this customer shortfall settlement, positioning it as a beacon of hope for global customers eyeing the recovery of their investments.

The Bankruptcy Court is a pivotal player in the ensuing legal action. Its approval breathes life into the proposed amended plan, potentially steering customers towards reclaiming over 90% of the distributable value. 

The underpinnings of this settlement are deeply rooted in a comprehensive resolution of the customer property dispute launched against the FTX Debtors. The second quarter of 2024 is not just a date but a milestone, where the confirmation of the amended plan is anticipated to unfold.

The legal tussle has been characterized by a firm assertion by users of FTX.com and FTX US, claiming property rights in specific assets and negating the notion of an unsecured claim synonymous with general creditors. 

The unveiling of the Customer Shortfall Settlement is akin to turning a new leaf, where customers are granted an unsecured claim against the FTX Debtors, with a special spotlight on equitable priority over distinct segregated or acquired assets.

Per insights from @spreekaway, the Debtors are laying out an olive branch, proposing a settlement terrain marked by a 15% reimbursement of net withdrawals made within a 9-day window preceding the bankruptcy filing. 

The terrain is navigable, with those whose net withdrawals surpass $250,000 having the option to settle the stipulated 15%, shielded from the spectre of legal action. For those nestled below the $250,000 threshold, the pathway is clear – the looming shadow of legal action is dispelled.

FTX’s Strategy for Resolution

The landscape of FTX’s Amended Plan is a complex, yet meticulous arrangement that seeks to bring order and fairness to the aftermath of the bankruptcy filing.

Echoing the skeletal structure of the Draft Plan introduced in July 2023, the Amended Plan is a refined version, a mix of precision and fairness aiming to address the intricate nuances of customer claims and asset distributions.

The plan divides the bulk of FTX’s assets into three separate pools. The first two are designated for FTX.com and FTX US customers respectively, ensuring that each faction of clients has a dedicated reservoir of assets to claim. 

The General Pool, the third reservoir, is an amalgamation of other assets, a safety net designed to cushion the blows of shortfall and ensure that no customer walks away empty-handed.

Amid the organized chaos of asset distributions, the Shortfall Claim emerges as a symbol of justice. Customers are not just relegated to the assets held at their respective exchanges; they are given the opportunity to lay claim to the General Pool, addressing the gaps left by assets absent from their native exchanges.

The estimated Shortfall Claim rings in at a staggering $8.9 billion for FTX.com and $166 million for FTX US, numbers that reflect the scale and impact of the bankruptcy.

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