FTX Bankruptcy Plan Moves Forward Despite Push for Crypto Repayments

Customers can now be reimbursed in cash plus interest under FTX’s bankruptcy repayment plan, which a U.S. District approved of Delaware judge. Judge John Dorsey’s decision to support cash-based payouts over the concerns of certain creditors seeking bitcoin repayment was a significant turning point in the ongoing FTX story.

Cash Repayments Over Crypto

FTX’s repayment plan, approved by Judge Dorsey, could distribute up to $16 billion in recovered assets to creditors. The plan allows customers to receive 118% of their claims in cash. Two years after FTX’s collapse, 98% of creditors will now receive compensation through this method. Although 94% of claimants supported this plan, Sunil Kavuri, representing the largest group of creditors, argued for repayment in cryptocurrency or in-kind assets.

Judge Dorsey rejected the motion for cryptocurrency payments during a hearing on October 7, pointing out that FTX’s exchange token (FTT) had very little value. He made it clear that there was no good reason for price increases in the future. With this decision, a significant chapter in the aftermath of FTX’s collapse, which rocked the cryptocurrency industry in 2022, is effectively closed.

Documents exposing Sam Bankman-Fried’s company’s misappropriation of client monies and fabrication of financial reports marked the start of FTX’s demise. Users and US authorities accused the site of fraud after these disclosures. Bankman-Fried was promptly taken into custody along with other high-ranking officials when the company filed for Chapter 11 bankruptcy.

Following a quick trial, Bankman-Fried received a guilty verdict and a 25-year prison sentence. He is currently contesting the ruling on the grounds that Judge Lewis A. Kaplan was biased in the court. In the meantime, plea agreements for shorter sentences were made by former executives like Gary Wang, Nishad Singh, and Caroline Ellison. In late September, Ellison was sentenced to two years in prison.

CEO of Bankruptcy John J. Ray III, who claimed that FTX lacked appropriate corporate controls, was able to retrieve billions of dollars’ worth of assets for the company’s estate. Even though FTX revival was discussed in June, investor interest led to the idea’s abandonment.