The US Bankruptcy Court for the District of Delaware has approved the FTX reorganization plan. This move marks a significant milestone for the bankrupt company, and it will see 98% of its creditors get 118% of their claim amounts.
The approval came two years following the crypto exchange’s dramatic implosion in November 2022.
Judge Approves FTX Reorganization Plan
US Bankruptcy Court Judge John Dorsey approved the FTX reorganization plan on Monday during a hearing.
US bankruptcy judge approves FTX reorganization plan, two years after the exchange's collapse https://t.co/vybtgVK9A7
— The Block (@TheBlock__) October 7, 2024
This move concludes the court proceedings for the bankrupt crypto exchange regarding its reorganization and repayment plan.
Further, the court’s approval will see the distribution of funds to the creditors. According to the plan, about 98% of the creditors will get a cash payment of at least 118% of their claim amounts.
During the hearing, Judge Dorsey congratulated everyone involved in resolving the situation. He noted that the case is an excellent example of tackling a challenging bankruptcy.
Judge Dorsey stated: “This is a model case for how to deal with a very complex Chapter 11 bankruptcy.”
Again, the judge explored the potential value of the crypto exchange’s native token, FTT. He said there is no telling that the coin’s value would not crumble to zero.
Dorsey explained that FTT has an inextricable connection with the debtors. He noted that without reviving the exchange, the native token will have no drive to impact its value positively.
Events Surrounding FTX Bankruptcy and Reorganization Plan
Meanwhile, the FTX reorganization plan got massive support from the creditors through a voting process. Over 94% of creditors under the dot-com customer entitlement claims class who returned their ballots accepted the plan.
However, some individuals, including the representative of the biggest FTX creditor group, Sunil Kavuri, criticized the plan. The representative campaigned for in-kind crypto payment instead of the dollar value of investors’ funds during the bankruptcy in 2022.
According to a recent press release, the crypto exchange estimated a total recovery payment between $14.7 billion and $16.5 billion. The amount will depend on the assets it recovered from different entities after its implosion.
Regarding the payment approach, David Adler, an attorney for some creditors, reacted during the court hearing on Monday. Adler pointed out that creditors will face a huge tax bill if the payment is in cash rather than in kind.
So, Adler inquired from Steven P. Coverick, managing director at Alvarez & Marsal North America LLC, about the possibility of FTX using the in-kind payment option.
Conversely, Coverick noted that the restructuring process extensively considered an in-kind distribution option. But finally, the plan doesn’t include such a condition for the creditors.
In addition, Coverick explained that the debtors have no crypto assets to use for in-kind distributions.
He MD stated: “The debtors do not have cryptocurrency that would be required to make in-kind distributions and, in fact, never had the cryptocurrency and the proportions in which customers believed they had in their accounts.”
Moreover, Judge Dorsey ruled out in-kind distribution during the hearing. This confirms that creditors will receive their repayment in cash, according to the plan.
In November 2022, FTX filed for Chapter 11 bankruptcy after becoming insolvent. The exchange wanted to restart with its new CEO, John J. Ray but lacked investors’ support and capital.
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Rida Fatima Crypto Journalist 
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