FTX compensation is coming: shareholders 'cut in line' to distribute $230 million, which may be less than a quarter of the compensation received.

Compilation: Felix, PANews

Recently, the latest developments in the FTX bankruptcy case have triggered debate and panic among some people in the encryption community, first creditors may only get 10-15% of their assets, and shareholders "forcibly preemptively" creditors to distribute $230 million in assets, and then there are rumors that FTX will begin to distribute repayment funds to creditors and customers on September 30, FTX's FTTToken rose by more than 80% within 24 hours, and the highest rose to $2.71, which is now at $2.14.

Revised Bankruptcy Documents Anger the Public

According to the bankruptcy plan of FTX, which received overwhelming preliminary support from creditors, 98% of creditors will receive at least 118% of their debt value in cash.

However, on September 28th, Sunil Kavuri, the representative of FTX creditors, disclosed the latest revised bankruptcy documents on X platform. The refund amount will be based on the value of Cryptocurrency when FTX submitted the application, so creditors will actually receive a return of "10% to 25% of their Cryptocurrency". For example, at that time, BTC was only about $16,000.

This decision has disappointed many creditors and even sparked anger among FTX creditors.

Sunil Kavuri claimed: 'The debtor, the US Department of Justice, and Judge Kaplan have confirmed that Crypto Assets holder did not receive compensation on the application date. Many FTX users continue to suffer from mental distress, panic disorder, divorce, and suicidal thoughts because their life savings were stolen and their property has not yet been returned.'

The majority of FTX creditors agree with Kavuri's views. One user said, 'It's disgusting to sneak this into the plan so late after the vote.' Another FTX creditor commented, 'I don't understand why the law can't protect us investors,' and described FTX's collapse as an eyewash. Another FTX creditor commented, 'Shameful, we've been fooled twice'.

FTX will allocate $230 million from government seizure proceeds to shareholders.

Just as one wave subsides, another rises. Making things even more complicated, according to a newly disclosed protocol, the FTX Estate led by Sullivan and Cromwell lawyers will donate 18% of the proceeds from government confiscation to a special fund for the "exclusive benefit" of certain shareholders, with the total amount reaching up to $230 million. Despite the protocol being officially executed on August 28, nearly two weeks after the deadline for creditors to vote on the plan, it was not publicly disclosed until September 27, which was also the last day for the estate to submit a revised plan.

Many creditors claim that this is not only unfair, but also considering the significant financial losses they have suffered, even a "criminal act". Because in bankruptcy proceedings, creditors usually get paid before shareholders, and when they voted overwhelmingly in favor of the plan before the August 16 deadline, they did not know about this provision.

However, the document states: "The debtor and the preferred stockholders each hope to avoid the costs, expenses, and delays associated with litigation involving the plan and the seizure of proceeds."

The repayment of funds by FTX will begin on September 30th, which is a rumor

It is worth mentioning that there are even rumors on social media that FTX will start distributing repayment funds to creditors and clients on September 30. FTT tokens then rose significantly. However, upon verification, the statement is a rumor because the repayment plan has not yet been approved by the court and needs to wait for a hearing to confirm.

The confirmation hearing for the FTX restructuring plan is currently scheduled for 10:00 AM on October 7th, Eastern Time. Judge John Dorsey of the Bankruptcy Court of Delaware will decide whether to approve the plan. If the court confirms the plan, FTX will be allowed to make 'full interest' payments in accordance with the US dollar price of encryption assets on November 11, 2022, to over 98% of customers and unsecured creditors.

According to Sunil Kavuri, the representative of the creditors on the X platform, there are approximately $5.5 billion in claims from non-encryption users, and it is expected that they will no longer invest in Crypto Assets in the future. Claimants with claims below $50,000 may start receiving distributions by the end of 2024, while claimants with claims above $50,000 may have to wait until the first or second quarter of 2025 to receive distributions.

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