FTX Bankruptcy Reorganization Plan Faces Pushback from Creditors

FTX’s bankruptcy reorganization plan has been rejected by a group of creditors chaired by Sunil Kavuri. They gave several reasons for their rejection, including the belief that the settlement does not benefit creditors.

The creditors contend that receiving payment in cash would incur further expenses for them. They suggest an alternate course of action that involves in-kind asset compensation instead. They also object to money being released to the FTX estate, using bankruptcy code Chapter 11. They contend that giving money to the FTX estate would be the same as giving money that has been stolen.

This pushback is the latest development in the ongoing conflict between the FTX bankruptcy estate, its creditors, and former customers. Last year, the Official Committee of Unsecured Creditors (UCC) expressed their disappointment with FTX’s bankruptcy reorganization plan, criticizing the lack of consultation during the initial drafting process.

Core Disagreements

A significant point of contention is the reimbursement terms. Former FTX customers and creditors have demanded that they be reimbursed at current market prices rather than the low prices from 2022 when the exchange collapsed during a crypto bear market. This issue remains a central disagreement as both sides debate the in-kind reimbursement plan and broader property rights concerns.

The fact that FTX creditors have sued Sullivan & Cromwell, the bankruptcy management company, has further complicated matters. They claim that the company knew about the exchange’s financial problems prior to its collapse and was complicit in FTX’s wrongdoing. Sullivan & Cromwell was exonerated of all charges by an independent review, which also confirmed that the company was ignorant of FTX’s illegal actions prior to the company’s collapse.

The outcome of these matters is still crucial for the future of FTX’s bankruptcy proceedings and the payment of its creditors’ debts, as long as the disagreement persists.