Bankrupt FTX Derivatives Exchange Finally Gets Judge's Approval to Commence Bankruptcy Payouts

Creditors of the bankrupt FTX Derivatives Exchange can finally breathe a sigh of relief. After two long years, Judge John Dorsey in the U.S

bankrupt FTX Derivatives Exchange can finally breathe a sigh of relief. After two long years, Judge John Dorsey in the U.S. Bankruptcy Court for the District of Delaware has approved the firm’s reorganization plan and bankruptcy payouts.

The exchange can now commence the distribution of funds to its creditors, using the $16 billion in assets recovered since its collapse. Judge Dorsey said the exchange’s success made it “a model case for how to deal with a very complex Chapter 11 bankruptcy proceeding.”

The approved plan will see FTX customers and U.S. government agencies paid out, while liquidators winding down the exchange’s operations outside the US will also get their settlement. However, there is an order of payment for FTX customers and creditors.

FTX will make its first payment to customers with claims of $50,000 or less, with the aim of completing this within 60 days. This covers around 98% of the exchange’s customers at the time of its implosion in 2022.

FTX Creditors Want In-kind Settlements, Not CashEach customer will receive a minimum of 118% of their claims, with the settlement amount depending on the value of the assets in their respective accounts when the exchange filed for bankruptcy.

However, Sunil Kavuri, a representative of the largest FTX creditor group, objected to the plans. He does not feel it is fair for the estate to pay out cryptocurrencies at their dollar value, arguing that payment in kind would be a better option.

Kavuri’s argument gained some support from David Adler, a lawyer representing some creditors, who pointed out that payment in cash would attract a significant tax bill to creditors if they get paid in cash and not in-kind.

But with Judge Dorsey’s approval, it does not look like FTX can consider in-kind settlements again.

FTX Recalled Donations And Sold Crypto Assets To Raise FundsTo repay users at a level that was feasible, FTX had to recoup donations made by its CEO Sam Bankman-FTX. The exchange also unstaked its assets, notably Solana (SOL), and sold off $3.5 billion in crypto assets through an Over-the-Counter (OTC) sale.

FTX sold part of its investment in the Artificial Intelligence firm Anthropic, and its CEO John Ray highlighted, “Today’s achievement is only possible because of the experience and tireless work of the team of professionals supporting this case, who have recovered billions of dollars by rebuilding FTX’s books from the ground up and from there marshaling assets from around the globe.”

The FTX reorganization plan received significant support from its creditors. More than 94% of the FTX Dotcom customer class endorsed the plan, with claims totaling $6.83 billion.

All these creditors are likely to receive their funds before the end of this year. In the meantime, there has been little to no news regarding FTX 2.0, a possible relaunch of the cryptocurrency exchange.

While some support reviving the platform, another group has consistently spoken against it, with Kraken co-founder Jesse Powell being one of them. He feels that if FTX were to start from scratch, it would be worse.

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