The bankrupt cryptocurrency exchange FTX is facing pushback from its creditors regarding the proposed reorganization plan. The objection, filed by FTX creditors Ahmed Abd El-Razek, Pat Rabbitte, Noia Capital, and activist Sunil Kavuri, highlights several key issues with the plan. These include the failure to address property rights concerns, inadequacy in meeting the best interest test, and inconsistencies in debtors’ liquidation analysis.
FTX had initially revealed that it had raised more funds than required to repay customers and complete the bankruptcy proceedings. The proposed reorganization plan outlines a repayment strategy where creditors with claims under $50,000 would receive 98% of their claims within 60 days of plan approval. Non-governmental creditors, on the other hand, would be paid 100% of their claims along with potential additional 9% interest payments.
While the proposed plan received positive feedback from the crypto community, Kavuri and other objectors raised concerns over the terms of the plan. They argue that distributing repayments in kind would benefit creditors by avoiding taxation implications. Objectors are suggesting that FTX consider partnering with another crypto exchange to facilitate in-kind distributions as a more tax-efficient alternative.
In addition to tax considerations, the objectors claim that the proposed reorganization plan may be legally unconfirmable. They point out that the plan includes releases that are not in the bankruptcy estate’s best interest, as well as ambiguous terms of service and statements by the debtors. Objectors are calling for a reevaluation of the plan to ensure it aligns with legal requirements and serves the interests of all parties involved.
The objections raised by FTX creditors shed light on the complexities and challenges involved in the cryptocurrency exchange’s bankruptcy reorganization. As the legal battle ensues in the U.S. Bankruptcy Court for the District of Delaware, it remains to be seen how FTX will address the concerns raised by creditors and whether a revised plan will be proposed to satisfy all parties involved. The outcome of this reorganization process will have significant implications for the future of FTX and its creditors.