- FTX plans to pay over 100% of claims to some creditors.
- FTX expects collection of $14.5 — $16.3 billion for distribution.
As a researcher with a background in finance and experience in studying insolvency proceedings, I am impressed by FTX’s plan to pay over 100% of claims to some creditors. This is an unprecedented move in the crypto industry and demonstrates a level of commitment towards restoring faith and confidence in the exchange.
Failing crypto exchange FTX intends to reimburse all creditor claims in full, with certain creditors potentially receiving more than what they originally owed.
As a researcher examining FTX’s bankruptcy proposal, I found an intriguing detail regarding creditor compensation. Specifically, creditors with claims totaling $50,000 or less are slated to receive approximately 118% of their original debts if the court approves the plan. This aspect of FTX’s May 7th proposal is noteworthy and could significantly impact these particular creditors.
Approximately 98% of FTX’s creditors, in terms of quantity, are expected to recover about 118% of their permitted claim amounts within sixty days following the plan’s implementation date.
John J. Ray III, FTX’s Chief Structuring Officer and CEO, confirmed their commitment to repaying all creditors in full.
“We’re excited to present a Chapter 11 reorganization plan that ensures non-governmental creditors will be fully repaid, including their initial claims and accrued interest.”
FTX fund recovery and plans
Noteworthy is that the remuneration will be computed using Bitcoin‘s [BTC] November 2022 discounted prices. For clarification, Bitcoin was priced at approximately $15,000 during that month, representing a substantial increase of nearly threefold to its present value of around $62,000.
Part of the statement mentioned that,
Creditors will be fully reimbursed for their approved claims, along with additional billions as compensation for the value of their investment waiting period.
The defunct exchange estimated the total recovered funds could be $14.5 billion and $16.3 billion.
As a researcher examining FTX’s financial situation prior to their bankruptcy proceedings, I discovered that they faced a significant gap in their reserves, holding merely 0.1% of Bitcoin (BTC) and 1.2% of Ethereum (ETH) for their customers’ funds.
As a crypto investor, I’ve managed to recoup a significant portion of my losses by selling off FTX’s holdings in popular cryptocurrencies like Solana (SOL), Avalanche (AVAX), and Polygon (MATIC).
The AI startup Anthropic was sold, resulting in the defunct exchange gaining approximately $884 million.
As a financial analyst, I would express it this way: If the court endorses a collective settlement between the government and other parties involved, I anticipate that these entities may be entitled to extra compensation on top of the recuperated funds.
One possibility is to rephrase as follows: FTX asserts that an agreement with the US Department of Justice could result in over $1.2 billion being made available to the company’s creditors through forfeited funds.
In response to the proposed plan, James Seyffart, an ETF analyst at Bloomberg, pointed out that it would have been more beneficial for FTX creditors if they had kept their assets instead. Regarding the over 100% payout plan, Seyffart expressed his view.
“Allowing individuals to receive more than 100% of their claim worth after filing for bankruptcy aligns with ethical principles.”
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2024-05-08 18:16