FTX’s latest proposal to repay creditors following its 2022 collapse could amount to $16.3 billion. While the plan aims to compensate creditors fully, some argue it still falls short of being fair.
Billions in FTX’s Compensation Promised
In a statement released on May 7, FTX announced a proposal that promises to repay all creditor claims plus “billions in compensation for the time value of their investments.” This plan is still subject to finalization and approval by the United States Bankruptcy Court for the District of Delaware. Notably, creditors with claims under $50,000 will be eligible for a 118% recovery, covering approximately 98% of FTX creditors by number. Despite this, the plan reimburses creditors based on the asset values at the time of bankruptcy in November 2022, rather than current prices, which have seen a significant increase since then.
Read more: Former FTX CEO Sam Bankman-Fried: Crypto Users Consider Settlement
Mixed Reactions and Industry Criticism
The plan has received mixed reactions, with some industry experts expressing dissatisfaction. FTX CEO and Chief Restructuring Officer John J. Ray III stated, “We are pleased to be in a position to propose a Chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors.” The total estimated value to be distributed ranges between $14.5 and $16.3 billion, with repayments occurring within 60 days after the plan’s effective date. However, critics argue that creditors are not receiving compensation equivalent to current market prices. Mike Belshe, CEO of BitGo, remarked, “I understand why the bankruptcy process needs to work this way but let’s not pretend victims are getting their money back.”
Conclusion
FTX’s compensation plan marks a significant effort to address the fallout from its collapse, promising substantial repayments to creditors. However, the ongoing debate about the fairness of the compensation highlights the complexities involved in bankruptcy proceedings and market fluctuations. As FTX continues to navigate its restructuring, the final approval and implementation of this plan will be closely watched by the crypto community and creditors alike.
