FTX debtors agreed to a new Customer Deficit Settlement after months of negotiations with FTX's Unsecured Creditors Committee, an ad hoc committee of customers outside the United States, and other representatives.
The court must approve the proposal that the FTX exchange Debtors will present as part of their Amended Plan in December.
FTX debtor chief celebrates creditor agreement
Earlier this year, creditors of FTX.com and FTX US filed customer ownership litigation, arguing that they should be given priority over unsecured creditors.
The new plan follows FTX's announcement to liquidate more than $3 billion in crypto assets to compensate clients.
Change in dollar value of FTX tokens, as debtors resolve their dispute. | Source: WSJ
The amendment, if approved by the court, would see creditors of FTX.com and FTX US receive 90% of the debtors' distributable assets during a new schedule.
However, debtors expect that FTX.com customers will suffer a higher percentage of loss and that their final refunds will need to take into account taxes and other government regulations.
Still, the plan represents a milestone in the plan to win back FTX customers, according to FTX restructuring chief John Ray III.
“The proposed solution to clients' real estate problems is another important milestone in our case. [The] debtors and their creditors have created enormous value from a situation that could easily have been a near-total loss for customers.”
The bankruptcy estate has invited customers to make inquiries about the proposed Customer Deficit Settlement. FTX Debtors will present the proposal to the court on December 16.
FTX filed for bankruptcy on November 11, 2022, after a leaked balance sheet from its market maker, Alameda Research (Alameda), exposed the latter's dependence on the illiquid FTT token.
Its former CEO, Sam Bankman-Fried (SBF), was later accused of allowing FTX to borrow unlimited amounts of funds from FTX clients.
Does Sam Bankman-Fried have anything to do with FTX's balance sheet?
Witnesses at the Bankman-Fried trial argued that SBF changed FTX's code to allow Alameda an unlimited line of credit
On Monday, former FTX engineering director Nishad Singh said Bankman-Fried knew details. He had long known about the $8 billion shortfall in client funds. Which FTX had due to its risky loans to Alameda.
This factor ultimately caused the company to go bankrupt. Last week, former Alameda CEO Caroline Ellison testified how Bankman-Fried asked her to prepare balance sheets. Especially for creditors who manipulated the values of assets and liabilities.
And Gary Wang, former CTO of FTX, later testified how Bankman-Fried asked him to change the code. Especially FTX to grant special privileges to Alameda.
