The receivership governing the remaining assets of collapsed cryptocurrency exchange FTX will frontload up to $230 million for preferred shareholders from the government’s proceeds-of-crime asset forfeiture proceedings, under newly revealed terms.
The latest filings show that the arrangement surprised creditors, who traditionally receive compensation ahead of shareholders in bankruptcy proceedings. Furthermore, although FTX’s restructuring plan was approved overwhelmingly in August, creditors were unaware of the terms at the time.
Sunil Kavuri, a representative of the largest FTX creditor group said:
General creditors were completely unaware, and FTX clients who followed me commented on this and said they felt they had been deceived yet again by representatives of FTX Asset Management and felt like they had been robbed all over again.
As part of the agreement, the FTX debtors, led by a team of lawyers from Sullivan & Cromwell, will allocate 18% of all proceeds from the government seizure action to a special fund earmarked for the "specific benefit" of specific shareholders, up to a total of up to $230 million.
Although the agreement was officially executed on August 28, nearly two weeks before the deadline for creditors to vote on the plan, the agreement did not come to light until September 27, which is when the receivership was allowed to The 30th and last day to submit a revised plan. This document states:
Both the debtors and the preferred stockholders are interested in avoiding the costs, expenses and delays associated with litigation related to the plan and the forfeiture proceedings.
FTX’s bankruptcy administrator did not immediately respond to a request for comment.
In a June filing, FTX receivership estimated the remaining assets from the forfeiture action to include:
Seizure of approximately $626 million from Emergent entities to be used to acquire Robinhood stock;
Fiat and digital assets “secured by certain accounts on third-party cryptocurrency exchanges” worth approximately $379 million as of June;
Approximately $150 million in cash was seized from accounts registered in the name of FTX DM;
and two private jets, originally purchased for an estimated $35 million in assets.
In short, as of June, FTX’s remaining assets were approximately US$1.19 billion. If 18% of them were allocated to the special fund, the amount would be US$214.2 million, which falls within the reasonable range of US$230 million stipulated in the agreement. The plan also provides each shareholder to receive up to $250,000 for legal fees, which will be paid out of another fund.
Under FTX's bankruptcy plan, which has received "overwhelming initial support" from creditors, 98% of creditors will receive at least 118% of the value of their claims in cash, according to a press release issued by FTX.
However, Sunil Kavuri, a representative of the FTX creditor group, argued that because bankruptcy claims are assessed based on the market value of cryptocurrencies at the time of FTX’s bankruptcy, creditors may actually only receive compensation for 10% to 25% of their original cryptocurrency holdings.
For example, when FTX collapsed, the price of Bitcoin was about US$16,000, but it has now risen to US$64,000. This means that if a creditor loses 1 Bitcoin in this bankruptcy case, he will only receive compensation of US$16,000 in cash ( Equivalent to 24%).
A confirmation hearing for FTX’s reorganization plan is scheduled for October 7 in the U.S. Bankruptcy Court of Delaware, which will determine whether the plan can be approved.
The amount of compensation for dissatisfaction is calculated based on the "currency price at the time of bankruptcy"! FTX victims file to recover $8 billion
〈Withdrawal of US$230 million from seized assets to "preferred shareholders"! FTX's "magic operation" angers creditors> This article was first published on "Block Guest".
