FTX has been granted court approval to survey its creditors on whether they prefer to receive their recovered funds in cash under the current liquidation plan or in crypto at its current market value.

On June 25, Judge John Dorsey of the United States Bankruptcy Court for the District of Delaware approved FTX’s plan to gather this feedback.

Several FTX creditors have voiced displeasure with the company’s liquidation plan proposed in May.

The plan suggested a 118% return for 98% of the creditors — those with claims under $50,000 — based on the U.S. dollar value of asset prices at the time of FTX’s bankruptcy filing in November 2022.

Many creditors are advocating for payouts in crypto, taking into account the crypto market’s 165% increase in total market cap since the exchange’s collapse.

For context, Bitcoin was trading around $16,900 when FTX declared bankruptcy but has since soared 265% to $61,770 at the time of publication.

FTX’s lawyer, Andy Dietderich, explained the vote aims to gather feedback from the broader base of FTX customers who have not been involved in the repayment negotiations so far.

FTX lawyers emphasized that bankruptcy laws mandate the firm to value claims as of FTX’s Chapter 11 filing, which aligns with its proposed plan.

They also noted that the cash repayment plan would be simpler to execute as it would avoid capital gains tax implications for creditors.

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It is important to note that even if creditors favor in-kind crypto repayments, the court is not obligated to approve them.

Creditors have until Aug. 16 to vote on the plan, and Judge Dorsey will decide on its approval on Oct. 7.

FTX has recovered $11.4 billion in cash since its bankruptcy filing, with expectations to reach $12.6 billion by Oct. 31, when FTX’s Chapter 11 plan could take effect.

FTX was one of the world’s largest cryptocurrency exchanges before its collapse in November 2022.

Around $8 billion in customer funds were misappropriated, largely by FTX’s trading firm Alameda Research, leading to a liquidity crisis when customers attempted to withdraw their assets.

The exchange is now led by John Ray, a turnaround specialist, who is managing the bankruptcy case.

Former CEO Sam Bankman-Fried was convicted of multiple fraud and money laundering charges in November 2023 and sentenced to 25 years in prison in March.

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