FTX Creditors Reject Payout Deal as ‘Insulting’ and Prepare to Rebel

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Some creditors of the bankrupt crypto exchange FTX are gearing up to oppose a recovery plan that promises to reimburse them 118 percent of their lost funds. They argue that the proposal is not as generous as it appears.

Since January, a group of FTX creditors has been forming a voting block, consisting of 1,600 claimants. The new plan is set to be voted on in June, with block leaders Sunil Kavuri and Arush Sehgal urging members to reject it. Sehgal criticized the recovery percentages as misleading and insulting to creditors.

FTX collapsed in November 2022 due to a lack of funds to process customer withdrawals, resulting in billions of dollars of missing customer funds. Founder Sam Bankman-Fried was later convicted of fraud and conspiracy in connection with the collapse and sentenced to 25 years in prison. The bankruptcy plan filed by FTX aims to fully reimburse all creditors, with interest, by liquidating investments from FTX Ventures and Alameda Research.

The plan also includes agreements from U.S. government bodies to hold off on high-value claims against FTX until creditors are repaid, with the IRS receiving a $200 million upfront payment. Despite offering a better recovery than initially expected, the plan faces opposition from creditors who question the valuation of their claims based on the dollar value of crypto assets at the time of the bankruptcy filing.

The value of bitcoin and other crypto assets has surged since FTX’s collapse, leading to concerns that customer claims may be undervalued under the plan. The creditors in the voting block are challenging the plan on various grounds, raising issues about the dollarization of their crypto assets and the impact of market fluctuations on the value of their claims.

Joel Khalili
Joel Khalili
Joel Khalili is a reporter covering crypto, Web3, and fintech. He was previously an editor at TechRadar, where he wrote about the business of technology, among other things. Before turning his hand to journalism, he studied English literature at University College London.

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