The reorganization plan of the failed cryptocurrency exchange FTX has been greenlighted by the US bankruptcy court, marking the conclusion of a lengthy and intricate crypto bankruptcy case that commenced two years back.
Judge John T. Dorsey from the US Bankruptcy Court District of Delaware gave the nod to the plan on October 7th, clearing the path for the final disbursement of funds to victims of the defunct FTX platform.
Repayment Strategy of FTX Cryptocurrency Exchange
The plan aimed at compensating 119% of the stated value to approximately 98% of past FTX users. John J. Ray III, the present CEO of FTX, lauded the approval as a significant stride towards repaying the victims.
“The Court’s affirmation of our Plan marks a crucial step towards distributing cash to customers and creditors.”
Ray also mentioned that the cash reimbursements would come with accrued interest.
“Looking forward, we are prepared to refund 100% of bankruptcy claims along with interest to non-governmental creditors, making it the most extensive and intricate distribution of assets in bankruptcy history.”
FTX anticipates raising between $14.7 billion to $16.5 billion for facilitating the reimbursements. A Bloomberg report noted that this accomplishment was facilitated by the ongoing bullish trend in the market, which elevated the value of particular FTX assets such as Solana [SOL].
Opposition to FTX Plan
Despite the positive outcomes, not all individuals were content with FTX’s scheme. A week preceding Judge Dorsey’s approval, a former FTX customer opposed the plan and advocated for repayment in the form of cryptocurrency assets held by users.
For reference, BTC has surged approximately fourfold since the winter of 2022 following FTX’s downfall.
Consequently, some victims were discontent with the absence of cryptocurrency repayments as they would be refunded based on the value equivalent to 2022 prices.
James Seyffart from Bloomberg concurred with the objections raised by the victims, highlighting that the addition of interest could not match the value if they were remunerated in cryptocurrency.
“Although adding interest to cash payments is positive, it pales in comparison to the worth of customer balances if repaid in cryptocurrencies.”
Nevertheless, Judge Dorsey dismissed the notion of cryptocurrency repayments. Legal experts familiar with the situation asserted that FTX did not possess adequate cryptocurrency assets to facilitate repayments in digital form.
In reality, the defunct exchange purportedly lacked the cryptocurrency assets that customers presumed it had.
In the aftermath of the development, FTT, the native token of the collapsed exchange, saw a surge of nearly 50%, despite the judge declaring it valueless on Monday.
With that being said, customer reimbursements will occur subsequent to FTX engaging a firm to manage the distribution process and fulfill other prerequisites. Opinions were divided on whether these reimbursements could trigger a surge in the cryptocurrency markets.