Oct 19, 2023

FTX Court Update

Bitcoin Macro

So what’s been happening, inside and outside of court, with FTX this week?

Bankrupt cryptocurrency exchange FTX has proposed a settlement to address customer property disputes and potentially expedite an amended payout plan by the second quarter of 2024. This settlement involves key stakeholders, including various committees of non-U.S. customers and unsecured creditors. The settlement is part of an amended reorganization plan expected to be filed by December 16.

The plan introduces a "Customer Shortfall Settlement," where the estimated claims stand at about $8.9 billion for and $166 million for FTX US. If the court approves the plan, eligible customers might receive over 90% of the global distributable value. However, full repayment is not anticipated, particularly for customers, who might experience higher percentage losses.

The initiative is seen as a significant step forward in the bankruptcy case, transforming a potentially massive loss scenario for customers into a more positive outcome. Despite this progress, the committee of unsecured creditors emphasizes that substantial work remains, highlighting the complexity of the Chapter 11 proceedings. The overall aim is to expedite the resolution process for all parties involved.

The FTX Debtors have made an agreement to offer eligible customers a chance to resolve their exchange preference liability. This will be done by reducing their claim or paying cash according to the Amended Plan. The Preference Settlement Amount for each qualified customer will be 15% of the difference between their withdrawals and deposits during the nine days before the chapter 11 cases. Exclusions from this settlement include insiders, affiliates, customers with certain knowledge or behaviors related to fund misuse, and those who altered their KYC details for specific reasons. If the FTX Debtors believe the settlement does not represent their claim's fair value, they can refuse. Customers with a preference settlement amount less than $250,000 during the nine-day period can accept the settlement without any reduction in claim or payment.

The FTX estate, overseen by a bankruptcy trustee, staked 5.5 million Solana (SOL) coins worth $122 million, alleviating concerns of a potential sell-off impacting Solana's market. FTX has also staked several million-dollar worth of ETH and MATIC tokens. This move is part of asset management amid ongoing legal processes, with the estate holding approximately $2-3 billion of various cryptocurrencies.

Bitcoin Macro

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