The creditors of the bankrupt cryptocurrency exchange FTX are now facing the choice of receiving assets in cash or cryptocurrency.
A document from the bankruptcy court in Delaware, USA, shows that Judge John Dorsey has approved the bid package and ballot needed for the exchange’s clients to express their preferences. The voting deadline is August 16th, and Judge Dorsey will make a ruling on the matter in early October.
Cash or cryptocurrency repayment by FTX
FTX’s proposed restructuring plan aims to repay creditors the dollar value of their cryptocurrency assets at the time of the exchange’s closure. The bankruptcy plan offers a 118% return to 98% of creditors with claims of less than $50,000. In addition, non-government creditors will receive 100% of their claims and may receive up to 9% additional interest from the time of FTX’s closure.
The troubled cryptocurrency trading platform also revealed that it has accumulated funds exceeding the amount needed to repay affected parties. Although creditors lost around $11 billion when FTX went bankrupt in 2022, the company has generated over $16 billion through fund consolidation and asset sales (including properties of former FTX executives).
When FTX ceased withdrawals and collapsed in November 2022, the price of Bitcoin (BTC) was around $16,000. However, at the time of writing, the value of cryptocurrency assets has exceeded $61,000, marking a 281% increase since then. In addition to BTC, the total market value of cryptocurrencies has more than doubled since November 2022, rising from $1 trillion to $2.27 trillion, indicating a rise in other cryptocurrency assets, including major altcoins.
FTX creditors oppose plan
Considering the growth of the cryptocurrency market over the past 20 months, FTX creditors believe that receiving the cash value of their holdings at the time of collapse would be unfair. However, FTX’s lawyers argue that the proposed plan complies with bankruptcy law, which requires exchanges to repay claims based on their value when filing for Chapter 11.
Furthermore, FTX’s lawyers insist that implementing the cash repayment plan will ensure that creditors do not have to pay capital gains tax.
Meanwhile, FTX creditors led by activist Sunil Kawuri recently opposed the proposed plan earlier this month. They argue that the plan fails to meet certain requirements of the Bankruptcy Code, including issues of property rights, consistent debtor liquidation analysis, and meeting the best interest test.
