Author: Nancy, PANews
The huge amount of $16 billion that FTX is about to pay is considered to be an important buying force to boost the crypto market. Recently, the FTX restructuring plan has entered the voting stage. In this article, PANews has sorted out the key information that creditors are concerned about, such as the key nodes of compensation, the objects of claims and the compensation plan.
Voting window closes August 17 to choose Bahamas or U.S. claim
Recently, the FTX Unsecured Creditors Official Committee (UCC) posted on the X platform that FTX debtors are sending comments and ballots to customers and creditors through Kroll to vote on the customer claims plan. The deadline for this voting plan is 05:00 Beijing time on August 17, and the voting results will be announced 7 days before the hearing. The proposed date for the confirmation plan hearing is 23:00 Beijing time on October 7.
These creditors are mainly divided into three types, namely "with voting rights", "without voting rights but deemed to have accepted the plan" and "without voting rights but deemed to have rejected the plan". Specifically, users holding fiat currencies or cryptocurrencies other than FTT will have the right to vote, while those holding only FTT/NFT will be deemed to have rejected the plan and have no right to vote. And according to the type of bond, different classifications will be made based on the compensation entity, amount and type, most of which are Class 5A, Class 7A and Class 13-18.
Among them, Class 5A is for FTX.com customers whose claims value exceeds US$50,000; Class 7A is for FTX.com customers whose claims value is less than US$50,000; Class 13-18 will not be able to obtain any claims and have no right to participate in the voting, including equity interests, FTT and small claims holders.
Both Category 5A and Category 7A FTX.com customers can choose to have their claims processed by FTX DM in the Bahamas liquidation process or through the U.S., but users can only receive compensation from one process, and the decision cannot be revoked or changed. Regardless of which process creditors choose to process their claims, they will receive roughly the same return at the same time, provided that the plan is effective and meets all customer KYC, AML, and tax reporting requirements.
However, the two compensation processes each have their own advantages. For example, FTT/small claims holders that are not supported by the United States may be able to obtain claims in the Bahamas process. The liquidation and reorganization case led by John Ray in the United States controls most of FTX's assets, making compensation more likely.
In addition, in terms of taxation, non-US creditors will not be affected by the 30% withholding tax in the United States. According to the documents, the ad hoc committee of non-US customers composed of international creditors has represented more than 31 countries around the world and has more than 60 members. As of June 28, 2024, the committee holds a total of approximately US$4.5 billion in claims for Dotcom customers (customers using the FTX.com exchange).
Class 7A creditors can receive a one-time payment and prefer stablecoins
If the bankruptcy protection plan is approved, all FTX.com customers are expected to receive full payment, with an estimated claim amount of 119 to 143 cents per dollar, as well as post-filing interest on unpaid claims calculated at a consensus rate of 9% from the filing date to the applicable distribution date. According to the claims user guide published by FTX's joint official liquidator, PricewaterhouseCoopers, the first interim dividend distribution is expected to be paid in late 2024 or early 2025.
Among them, 7A claims are 119%, and it is expected that a lump sum payment will be made within 60 days, accounting for 98% of the total number of creditors; the recovery amount of 5A claims is expected to be between 129% and 143%, but after full payment and payment of application interest, the remaining value will be obtained through the distribution of the supplementary relief fund, which is expected to be funded by the recovery funds that should have been paid to senior subordinated government bondholders. From the perspective of the rules, compared with 7A, the payment of 5A will be carried out in multiple stages, and the specific time is not clear, but they can also obtain convenient claims by agreeing to reduce the claim amount to less than US$50,000.
The order of repayment is also crucial to the interests of creditors. Previously, the IRS pushed $685 million of the $885 million claim to be paid after customers were fully repaid due to objections from creditors. Recently, FTX reached a settlement with the Commodity Futures Trading Commission (CFTC), with the $4 billion claim ranked after creditors and interest. The money paid to the CFTC will be transferred to the Supplementary Relief Fund to compensate severely damaged cryptocurrency holders (only paid if there are sufficient funds).
In terms of compensation, FTX creditors previously said that cash repayment would cause customers to pay taxes on the cash they received, and they would rather receive distributions in the form of stablecoins rather than cash. In response, the UCC stated that the committee will urge debtors to provide stablecoin options to as many creditors as possible.
The UCC believes that although the reorganization plan is not perfect, it is the best solution to maximize the compensation for creditors. If the Chapter 11 reorganization is converted to the Chapter 7 liquidation procedure due to creditor opposition, the recovery amount will be reduced, the compensation time will be extended, and the litigation costs will increase. Therefore, the committee encourages creditors to vote in favor of the plan.
