FTX Debtors estimate that by the second quarter of 2024, court sanctions will result in customers receiving more than 90 percent of value.
In a filing on Monday, October 16, FTX Debtors announced the settlement of customer property disputes in connection with its pending Chapter 11 cases. The customer deficiency settlement will be included in the Amended Plan of Reorganization, which FTX intends to submit by December 2023.
Subject to approval by the Bankruptcy Court, the proposed amended plan anticipates that more than 90 percent of the distributable value will be distributed to customers worldwide.
This customer shortfall resolution is intended to resolve the customer property dispute filed against the FTX Debtors and facilitate the confirmation of the amended plan by the second quarter of 2024.
The underlying customer property litigation asserted that users of FTX.com and FTX US possessed property rights in particular assets, as opposed to an unsecured claim on par with other creditors.
This dispute is resolved by the Customer Shortfall Settlement, which grants customers an unsecured claim against the FTX Debtors with equitable priority over specific segregated or acquired assets.
According to @spreekaway, the Debtors propose a settlement option in which you can reimburse 15% of your net withdrawals made within the past nine days from the date of filing for bankruptcy.
If your net withdrawals during this period exceed $250,000, you can pay the 15%, and they will not pursue legal action against you. However, if your net withdrawals in the previous nine days total less than $250,000, they will not pursue legal action.
On FTX customer clawbacks:
Debtors offer settlement of 15% of net withdrawals within 9 days of bankruptcy filing, pic.twitter.com/IJ3jRwfhcm
— Spreek (@spreekaway) October 17, 2023Specifics of The Amended Plan
The Amended Plan resembles the Draft Plan initially presented for discussion on July 1, 2023 by the FTX Debtors. Following the terms of the Amended Plan:
1, The FTX Debtors would categorize the bulk of their assets into three distinct pools: assets set aside for the benefit of FTX.com customers, assets reserved for FTX US customers, and a “General Pool” containing other asset.
2. Customers of FTX.com and FTX US would not only possess a claim against the assets held at their respective exchanges but also a “Shortfall Claim” against the General Pool. This Shortfall Claim aligns with the estimated value of assets that are absent from their respective exchanges.
3. Further, the projected Shortfall Claim is estimated at roughly $8.9 billion for FTX.com and $166 million for FTX US.
4. Also, 66% of the General Pool would be exclusively allocated for the settlement of Shortfall Claims. While the remaining 34% would go toward the settlement of any remaining Shortfall Claims and other claims on a proportional basis.
Customer Shortfall Compensation
FTX’s recent customer shortfall resolution results from months of intensive negotiations with FTX’s creditors. They have also been communicating with several interested parties to reach a consensus. The new management of FTX, led by John J. Ray III, has made significant efforts toward consumer settlements.
All of this occurs concurrently with exposing SBF in the most recent filing. The case developments demonstrate how SBF spent customer funds irresponsibly on celebrity promotions and offers.
During his testimony on Monday, Nishad Singh, the former head of engineering at FTX, also admitted to perpetrating crimes with Sam Bankman-Fried.
