FTX will extract up to $230 million worth of proceeds from the government forfeiture action for the benefit of certain shareholders, according to newly amended bankruptcy documents shared by FTX creditor Sunil Kavuri.

FTX is transferring 18% of DOJ forfeiture funds up to $230m to FTX equity holders (Plan supplement)FTX crypto holders are getting 10% to 25% of their crypto back pic.twitter.com/3f6BePpoNU

— Sunil (FTX Creditor Champion) (@sunil_trades) September 28, 2024

An additional US$200 million was transferred to shareholders, and the compensation order for shareholders was actually higher than that for creditors?

FTX’s bankruptcy plan was voted on on 8/16 and received overwhelming support. However, FTX creditor Sunil Kavuri revealed that there was an additional clause that would leave up to US$230 million for preferred shareholders, seriously affecting the rights of creditors.

According to The Block, the agreement was finalized only after the deadline for creditors to vote on the plan and was announced thirty days later (the maximum time allowed by law), which surprised and angered some creditors because they did not Know this clause.​

In traditional bankruptcy proceedings, shareholders are last in line for compensation, but FTX argued that compensation to shareholders would help avoid costly litigation and delays associated with disgorgement of proceeds.

FTX is transferring 18% of funds seized by the U.S. Department of Justice (DOJ) to FTX equity holders, up to $230 million. Including cash, Robinhood stock, and private jets, FTX equity holders could receive $214.2 million based on a value of $1.19 billion at the end of June.

Cryptocurrency holders only get 10% to 25% back on their cryptocurrencies?

Kavuri said FTX cryptocurrency holders would only receive 10% to 25% of their cryptocurrency back, leaving creditors with the opportunity to claim more.

As reported in May, FTX expects the total property value currently available for distribution to be between $14.5 and $16.3 billion. If approved by the bankruptcy court, 98% of FTX's creditors would receive 118% of their allowed claims within 60 days of the plan's effectiveness. Kavuri revealed additional amounts that were subject to judicial forfeiture. The main reason for its estimate of 10% to 25% is that the current cryptocurrency price is too different from when it filed for bankruptcy (for example, Bitcoin was only 16K when it went bankrupt, but the current price is 65K). The creditor should base the claim on the dollar amount for which the claim was originally filed.

A confirmation hearing on FTX's reorganization plan is currently scheduled for October 7, when U.S. Bankruptcy Court Judge John Dorsey of the District of Delaware will decide whether to approve the plan.

This Article FTX Reorganization Hearing Held on 10/7 Will Additional $200 Million Be Allocated to Shareholders? First appeared in Chain News ABMedia.