FTX Estate Proposes Recovery Plan With 90% Asset Return Expected 

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The now-defunct FTX crypto exchange announced a proposed settlement plan this week that aims to resolve disputes over customer assets lost when the company filed for bankruptcy in November 2022.

FTX Debtors Chart Path to Redress: 90% Asset Recovery Proposed in Bankruptcy Plan

The FTX debtors’ proposed settlement plan includes priority payouts to customers and an offer to reduce potential preference liability, with customers expected to recover over 90% of assets worldwide if approved. FTX filed the settlement plan in Delaware bankruptcy court and aims to gain approval by the second quarter of 2024.

The proposed settlement divides FTX assets into three pools — one for FTX.com customers, one for FTX US customers, and a general pool — and grants customers priority “shortfall claims” against the general pool totaling an estimated $9 billion.

“Taking into account both the priority and the non-priority portions of the shortfall claim, the FTX Debtors estimate that customers of FTX.com and FTX US would receive, collectively, over 90% of distributable value worldwide if the Amended Plan is approved,” the announcement details.

“Together, starting in the most challenging financial disaster I have seen, the debtors and their creditors have created enormous value from a situation that easily could have been a near-total loss for customers,” said John J. Ray III, FTX’s chief restructuring officer and current CEO.

To resolve potential preference claims, FTX offered customers a deal to reduce payouts based on net withdrawals made nine days before bankruptcy. The offer requires customers to pay back 15% of the amount their withdrawals exceeded deposits during that period.

For example, if a customer withdrew $100,000 but only deposited $20,000 in the 9 days before bankruptcy, their net withdrawal would be $80,000. They’d pay back 15% of that, or $12,000, reducing their payout. Customers with less than $250,000 in net withdrawals won’t face a haircut under the deal. FTX can also exclude certain customers from the offer.

Actual recovery percentages remain uncertain and depend on variables like asset sales, litigation results, and fluctuations in crypto prices, the announcement stressed. Non-customers face greater losses than exchange users under the deal. FTX called the deal a “major milestone” resulting from “months of extensive, arm’s-length negotiations” between major creditors like the customers committee.

What do you think about the FTX debtors’ proposed settlement plan? Share your thoughts and opinions about this subject in the comments section below.