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FTX, the bankrupt cryptocurrency exchange, will request a judge’s permission on Tuesday to allow customers to vote on a proposed liquidation plan.
This plan aims to repay customers in cash despite objections from some customers who demand higher repayments reflecting current cryptocurrency values.
Since declaring bankruptcy, FTX has managed to recover up to $16 billion to repay its customers, with over $12 billion in cash. The company claims it will be able to repay all customer claims in full.
FTX will present this plan for approval to U.S. Bankruptcy Judge John Dorsey at a court hearing in Wilmington, Delaware. If approved, this plan will open the voting process for customers to decide on the wind-down plan.
Some customers argue that the proposed repayments are based on the cryptocurrency prices from November 2022, when FTX filed for bankruptcy. Given the recent rise in cryptocurrency prices, they contend that this approach undervalues their claims.
Customers who had one bitcoin on FTX during its bankruptcy filing would receive approximately $16,800 in cash, compared to the current value of about $60,000 for one bitcoin.
Many aggrieved customers have filed lawsuits outside bankruptcy, arguing that FTX never owned the customer deposits and should repay their full current value. They also claim that FTX’s proposed voting forms are misleading, suggesting a “full recovery with interest,” which they believe is inaccurate.
FTX CEO John Ray has stated that the funds deposited by customers were misappropriated by former CEO Sam Bankman-Fried, who has been sentenced to 25 years in prison.
Ray emphasized that FTX can only distribute cash payments, as the original cryptocurrency assets are no longer available.
He argued that cash payments are the most equitable solution, considering the varied types of cryptocurrency assets held by different customers, whose values have fluctuated since the bankruptcy filing.
FTX asserts that 98% of its customers will be able to receive full repayment within 60 days of court approval of the wind-down plan. This expedited payment option will cover all customers owed up to $50,000.
If Judge Dorsey approves FTX’s disclosure statement, creditors will have until August 16 to vote on the liquidation plan. The outcome of this voting process will determine the next steps in FTX’s efforts to repay its customers and conclude its bankruptcy proceedings.
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