FTX’s Revised Reorganization Plan Addresses Cryptocurrency Claims Valuation

FTX’s Revised Reorganization Plan Addresses Cryptocurrency Claims Valuation
Photo by Anne Nygård / Unsplash

In a significant move, the debtors of the defunct cryptocurrency exchange FTX have submitted an amended Chapter 11 plan of reorganization. This plan proposes that customer asset claims should be valued retroactively to November 11, 2022, the date of the exchange’s collapse. The plan aims to use a conversion table to convert crypto assets into cash for determining the value of each claim.

Since the bankruptcy filing, the value of cryptocurrencies like Bitcoin has increased substantially. This rise could significantly impact the valuation of claims. Furthermore, FTX has been authorized to sell approximately $873 million worth of trust assets to help repay creditors.

Amidst these developments, the FTX 2.0 Customer Ad Hoc Committee suggested revisions to the reorganization plan, aiming for a fair balance among stakeholders' interests. This comes as scrutiny intensifies over crypto assets linked to FTX and Alameda Research, especially after reports of transfers worth millions to various exchanges.

Legal Developments and Consequences

Sam Bankman-Fried, the founder of FTX, has been found guilty of defrauding customers and lenders and faces a potential prison term of 15-20 years, although the maximum could be up to 115 years. His sentencing is tentatively set for March 28, 2024.

Meanwhile, Caroline Ellison, Gary Wang, and Nishad Singh, who admitted to participating in fraudulent activities under Bankman-Fried, might receive minimal prison time due to their cooperation. They could, however, face financial repercussions like returning ill-gotten gains and making restitution payments.

IRS Claims and Impact on Recovery Efforts

FTX debtors have raised concerns over a massive $24 billion tax claim by the IRS, arguing it could hinder the return of customer funds. They contend that the exchange incurred substantial losses, not profits, and warn that satisfying the IRS's claim would detract from the recoveries due to victims.