Interpretation of FTX preliminary restructuring plan: All non-customer claims will be subordinate, and the amount of FTT claims will be zero.
Original Author: Nancy, PANews
Thousandfold Memecoin BALD was rumored to be manipulated by SBF as a black hand behind the scenes, although it may be a rumor, the restructuring plan of FTX has been confirmed at the same time. On August 1st, according to a tweet from the FTX 2.0 Creditor Alliance, FTX has submitted a preliminary restructuring plan and a list of terms, key information includes all non-customers' claims being considered secondary, FTT claim amount being zero, and the restart of the offshore exchange to compensate for the customers' gap.
It should be noted that the current FTX restructuring plan is still in the initial stage, and the team will submit a revised plan and disclosure statement based on the creditors' feedback in the fourth quarter of 2023 to achieve consensus and get out of bankruptcy.
Payout in US dollars in proportion, FTT claim canceled
"We are pleased to make a commitment to submit a restructuring plan in the relatively early stages. FTX intends to work with creditors in the coming months and submit a revised plan and disclosure statement in the fourth quarter of 2023," said FTX CEO John J. Ray III. In fact, according to the provisions of Chapter 11 of the US Bankruptcy Code, the debtor must submit two important documents to the court during the bankruptcy reorganization process, namely the reorganization plan and the disclosure statement.
FTX indicated in the restructuring document that considering the very large and complex nature of the debt claims, legal arguments, and disputes in the FTX bankruptcy case, including claims against the debtor and intercompany claims by different debtors, the release of this FTX restructuring plan aims to provide a sincere solution to the world.
According to the restructuring document, FTX will repay through the sale of various assets related to FTX.com customers, assets related to FTX US customers, and other assets that the debtor believes are not clearly attributed to the exchange.
At the same time, FTX has also classified the creditors, but almost all proposed creditor categories are listed as "incomplete," which means that FTX expects creditors to be unable to recover the full compensation and will be paid in US dollars according to a certain proportion.
The document shows that creditors are divided into priority creditors, secured creditors, FTX offshore trading users (referred to as "Dotcom claimants" in the document), FTX US users, NFT holders, unsecured creditors, subordinated creditors, and subordinate bonds, but administrative claims and certain other special priority claims will not be classified and will be paid in full in cash in accordance with the Bankruptcy Law. Among them, seven categories of creditors are required to vote on this restructuring plan, while FTT holders (regardless of whether they hold it on the FTX exchange), preferred equity and equity investors, and other related creditors will be cancelled and will not receive any claims.
The priority of the claims will be determined in accordance with the "waterfall priorities" and each class of creditors will be reimbursed proportionally from the remaining pool of claims after the claims of the previous class of creditors are satisfied. The specific order of payment will be determined after consultation with the stakeholders.
Or rebuild the exchange, allowing users to convert their debts into equity
In addition, the restructuring document also states that creditors can choose to pool their assets to create an offshore trading company, thereby foregoing cash payments to purchase shares in the new exchange. "The debtor may decide whether to allow the offshore trading company to repay in the form of equity securities, tokens, or other interests by investing in these stocks, tokens, or interests."
However, FTX also emphasizes that the plan is still in its infancy and may change. It will be revised based on feedback from consultants and other stakeholders and will be submitted in the fourth quarter of 2023.
Recently, John Ray revealed that FTX has "begun soliciting interested parties to relaunch the FTX.com exchange." According to the Wall Street Journal, insiders revealed that FTX has been negotiating with investors regarding possible financing for the relaunch, but potential bidders must submit a letter of intent before this weekend—an outline of their participation terms and conditions. For example, blockchain technology company Figure has expressed interest in helping support the relaunch of FTX, which participated in the bidding for Celsius Network but ended in failure; venture capital firm Tribe Capital also recently stated that it is considering injecting new funds to relaunch FTX.
Furthermore, the relaunched FTX will not be renamed "FTX 2.0" or any other derivative of its original name, but will be renamed as a separate entity with a different name. The court documents show that FTX has hired the US law firm Ladas & Parry to provide intellectual property liquidation, registration, and copyright/patent services. Additionally, according to previous reports by Reuters, FTX may relaunch in 2024.
And in the eyes of John Ray and the restructuring team, the restart of FTX seems to be the best way to ensure better results for creditors. "We expect customers to get recovery and/or equity tokens in FTX 2.0."
FTX liquidation team questioned for owing customers $8.7 billion
According to the second mid-term report released by FTX bankruptcy restructuring team in June this year, the current deficit is about $8.7 billion, with approximately $700 million of liquid assets recovered. However, there is still a long way to go to reach the $12 billion debt, and the third report will be released in August. In order to recover more assets, FTX liquidation team recently sued former executives such as SBF, seeking to recover $1 billion of misappropriated funds.
However, as the FTX bankruptcy restructuring progresses, the accumulated legal costs are consuming users' funds. According to the court documents released by the end of June, the FTX liquidation cost has exceeded $200 million. Among them, more than $120 million was spent on legal expenses from February 1st to April 30th, 2023 alone, and these expenses should be covered before the launch of Chapter 11 bankruptcy.
In response to this, many creditors questioned that the FTX restructuring team has not made substantial progress. Not only did they disclose that the assets have decreased from $7.3 billion a few months ago, but they also repeatedly mentioned known content in the report. There are also significant inconsistencies in legal expenses, such as Sullivan & Cromwell using too many rookie lawyers to handle the case. Based on historical cases, the legal fees in FTX cases have accounted for nearly 3% of the recovered assets, exceeding well-known bankruptcy cases such as Enron and Lehman Brothers.
In addition, Katherine Stadler, the bankruptcy lawyer appointed by the US court to examine the fees, has called for a reduction in some legal fees in June this year. She requested that the chief lawyer, Sullivan & Cromwell, reduce their $42 million bill by approximately $650,000 to compensate for the excessive personnel, excessive meetings, and unclear document work.
The FTX 2.0 Creditors Alliance also commented today that the Unsecured Creditors Official Committee (UCC) should choose to operate the FTX 2.0 team while requiring the restart and recovery of tokens and charging interest on its $2.6 billion cash holdings. Judging by the decision of John Ray and his team not to put this money into T-bills, they are incompetent operators and it may be necessary to oppose their upcoming motion to extend the exclusivity so that creditors can submit their own plans.
As bankruptcy goes by day by day, customer assets are also deteriorating (decreasing). As Delaware Bankruptcy Court Judge John Dorsey said, for creditors, the cost of litigation and reorganization is high, and restarting FTX may Whether it really improves their own situation is still unknown.
