After the bankrupt cryptocurrency exchange FTX’s restructuring team proposed the latest repayment plan last month, lawyers representing the creditors have objected to the plan, stating that if the creditors receive compensation in the form of cash instead of cryptocurrency, they will face a huge tax burden.
Background:
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Since its closure in November 2022, the restructuring team of bankrupt cryptocurrency exchange FTX has been actively raising funds to repay the creditors. The team announced the latest repayment plan last month, estimating the owed amount to be $11.2 billion. After the sale of assets, they will have cash amounting to approximately $14.5 billion to $16.3 billion available for compensation.
According to the plan, creditors can receive compensation for losses ranging from 142% to 118% depending on the type of claim. The majority of customers (creditors with holdings of $50,000 or less) can receive approximately 118% cash compensation for their losses.
The compensation is calculated based on the value of the platform’s funds in USD on the day of FTX’s bankruptcy filing and will be paid in cash. Therefore, unless the assets held by users on FTX are stablecoins, they will still suffer significant losses (BTC was only $17,000 at the time).
FTX’s restructuring team will conduct a vote. US bankruptcy judge John Dorsey held a hearing this Tuesday to disclose the statement and voting process. Andrew Dietderich, the lawyer representing FTX in the bankruptcy proceedings, stated that the repayment plan is essentially agreed upon by both parties, and no major stakeholders contacted by the restructuring team have raised objections. Therefore, FTX plans to seek creditor votes to obtain feedback.
However, the final decision may still be made by the judge, and even if the creditors oppose the current compensation plan, they may not be able to overturn it. Currently, it appears that FTX’s liquidation team has reached an agreement with the relevant major stakeholders and is confident of winning the vote.
Creditors’ lawyers request compensation in cryptocurrency form. On the other hand, David Adler, the lawyer representing three creditors, stated that the disclosed statement is “seriously deficient” and objects to the creditors receiving compensation in cash instead of cryptocurrency.
David Adler pointed out that his clients generally strongly desire to receive compensation in the form of cryptocurrency. Otherwise, according to US tax law, if the creditors receive compensation in cash instead of cryptocurrency, they will face a huge tax burden.
In response, John Dorsey stated that this is a matter that needs to be confirmed and can be raised later. The next hearing will be held on July 17th and August 15th.
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