FTX can now solicit creditor votes on its liquidation plan.
Customers to be repaid in cash, not cryptocurrency.
Dispute over repayment values based on 2022 crypto prices.
A U.S. bankruptcy court has approved FTX’s liquidation plan, paving the way for the beleaguered crypto exchange to repay customers in cash following its high-profile collapse.
This decision comes after extensive efforts by the FTX team, which has collaborated with multiple U.S. government agencies and liquidated assets to amass funds. FTX attorney Andy Dietderich stated during a court hearing:
“This has been a huge team effort. Everybody was an involuntary investor in this crazy pool of assets, and our job was to turn it into cash.”
The assets recovered thus far originate from diverse sources, including investments in crypto, tech companies, venture funds, and real estate, all allegedly purchased with misappropriated customer funds. The total amount recovered to date nears $16 billion, including approximately $12 billion in cash. FTX intends to reimburse its customers in cash rather than cryptocurrencies.
However, some customers are dissatisfied with the plan and are demanding higher compensation, citing recent increases in cryptocurrency values. They argue that they are not receiving a fair amount because the value of cryptocurrencies has surged since the firm’s bankruptcy in 2022.
Despite these objections, U.S. Bankruptcy Judge John Dorsey approved FTX’s proposal documents and initiated voting on the wind-down plans.
FTX’s fiasco was one of crypto’s biggest crashes, with roughly 9 million customers and investors facing billions of dollars in losses. John Ray, the current CEO of FTX, explained that the company cannot return the exact amount deposited by customers because the funds were misappropriated by former CEO and founder Sam Bankman-Fried, who is serving a 25-year prison sentence.
Ray stated that cash payments are the only equitable repayment option, as different customers hold various types of cryptocurrency assets with fluctuating values. The exchange also pledged to repay all claims in full, with interest, although some customers have criticized this promise as misleading.
Most of 98% FTX customers were eligible to receive full repayment within 60 days of court approval of its wind-down plan. Creditors have until August 16 to vote on the liquidation plan, with FTX aiming to seek final approval on October 7.
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