Crypto

FTX creditors reject payout plan as tension continues to rise

FTX creditors reject payout plan as tension continues to rise

The proposal could lead to some creditors losing money, not recovering it

FTX’s bankruptcy reorganization plan is being rejected by a group of creditors led by Sunil Kavuri. Several grounds for dismissing the plan were cited, including the contention that the settlement doesn’t serve creditors’ best interests.

The group asserted that being reimbursed with cash would cause the creditors to incur unwarranted costs. A possible solution mentioned in the filing is the reimbursement of assets in-kind.

Creditors also opposed releasing funds to the FTX estate, quoting Chapter 11 bankruptcy law. The group claims that the FTX bankruptcy estate would be distributing stolen funds.

The objections are the latest in the months-long fight between the FTX bankruptcy estate, FTX creditors, and former customers. Last year, FTX’s Official Committee of Unsecured Creditors (UCC) expressed that it was “extremely disappointed” by the FTX’s bankruptcy reorganization plan, saying they weren’t contacted when the initial draft process was initiated.

Former FTX customers and creditors demanded in January that they be reimbursed at current market prices instead of the low 2022 prices at which the exchange collapsed during a crypto bear market.

This has become a central point of disagreement as FTX and creditors continue to argue regarding the in-kind plan and the more significant property rights issue.

FTX creditors also filed a lawsuit against Sullivan & Cromwell, the law firm handling the bankruptcy, alleging it was involved in the FTX fraud and knew about the state of affairs before the exchange collapsed.

An independent investigation later exonerated Sullivan & Cromwell of any misdeeds, asserting that the law firm knew nothing of FTX’s criminal activity before the collapse.

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