Embattled cryptocurrency exchange FTX has put forth an amended proposal that aims to return up to 90 per cent of creditor holdings.
The proposal, set to be formally filed by the debtors’ group overseeing the bankruptcy process, is scheduled for review by the U.S. Bankruptcy Court by December 16, 2023.
Under the proposed plan, missing customer assets are categorised into three pools based on the circumstances at the onset of the Chapter 11 cases. These include assets segregated for FTX.com customers, assets for FTX.US customers, and a “General Pool” encompassing other assets. Customers with a preference settlement amount below $250,000 are offered the opportunity to accept the settlement without any reduction in claim or payment.
The proposal also introduces a “Shortfall Claim” against the general pool, corresponding to the estimated value of assets missing at the time of FTX’s collapse. The estimated shortfall claims are staggering, with nearly $9 billion for FTX.com and $166 million for FTX.US. However, the document acknowledges potential complications in recoveries, citing factors like taxes, government claims, and token price fluctuations.
FTX CEO John J. Ray III views the proposal as a significant milestone in the case, emphasising its potential to mitigate what could have been a severe financial blow for customers. The announcement signals a strategic move by FTX to address concerns and complexities surrounding the bankruptcy, reflecting a commitment to resolving the situation.
The proposal’s unveiling coincided with the eleventh day of the trial of FTX founder Sam Bankman-Fried (SBF), who is facing criminal charges. The trial featured crucial testimonies from accounting experts, including Professor Peter Easton and FBI accountant Paige Owens.
Professor Easton’s detailed analysis revealed the extent of misappropriation of FTX customer and investor funds by Alameda Research, FTX’s sister hedge fund. The analysis exposed substantial deficits in Alameda’s accounts despite continuous payouts, diverting funds for investments, property acquisitions, political contributions, and charity foundations. Notably, a significant portion of third-party loans serviced by Alameda used FTX customer funds, raising concerns about the mingling of resources.
FBI accountant Paige Owens shed light on extensive political donations associated with SBF and others. The prosecution presented evidence of transfers totaling $47 million from Alameda’s Prime Trust account to SBF’s personal account, with a significant portion directed towards political action committees. The trial unveiled connections between FTX customer funds and political contributions, adding complexity to the allegations.