FTX creditor representative Sunil Kavuri expressed opposition to FTX’s bankruptcy reorganization plan in a post yesterday, rejecting the implementation of the plan for three reasons.
Does not serve the best interests of creditors
Creditors have incurred losses exceeding $10 billion
Can FTX repay more money?
Since its closure in November 2022, the reorganization team of the bankrupt cryptocurrency exchange FTX has been actively raising funds to repay creditors. According to the latest repayment plan released by the reorganization team last month, the estimated amount owed is $11.2 billion. However, after the sale of assets, they will have approximately $14.5 billion to $16.3 billion in cash available for compensation. Therefore, the vast majority of users (those who previously held funds below $50,000) can receive about 118% cash compensation.
However, it is important to clarify that the compensation for losses is calculated based on the platform funds of FTX on the day of the Chapter 11 bankruptcy filing. So unless the assets users had on FTX were stablecoins, they are still at a significant loss (BTC was only $17,000 at the time).
The current progress indicates that creditors may be repaid as early as this year. However, a spontaneously formed FTX creditor group in the community has once again opposed the bankruptcy reorganization plan.
Sunil Kavuri, representing the FTX creditor group, posted on a community platform yesterday stating that the Creditors’ Advisory and Holders Committee (CAHC) opposes FTX’s bankruptcy reorganization plan. Creditors have rejected the plan for various reasons:
– Cash repayments may trigger tax events, leading to unnecessary costs for creditors. It is suggested that asset repayments be considered as an alternative.
– Creditors invoke Chapter 11 of the Bankruptcy Code to oppose releasing funds to the debtor (FTX bankruptcy reorganization team), claiming they are trying to distribute stolen assets.
– Does not serve the best interests of creditors.
In addition, Kavuri also mentioned other points of opposition, including the need to update disclosures for IRS settlements, undisclosed litigation proceedings, inconsistencies in the debtor’s liquidation analysis, and objections to the timing schedule.
According to previous reports, Sunil Kavuri had already suggested in a post on August 8th that creditors should vote against FTX’s reorganization plan. It seems that Kavuri’s assets at the time of FTX’s closure were mostly stored in the form of spot tokens, which is why he is particularly dissatisfied with this compensation plan.
On the other hand, FTX has made significant progress in tax matters. In April of last year, the Internal Revenue Service (IRS) in the United States claimed $44 billion in unpaid taxes from FTX, which was then amended to $43 billion in September and further reduced to $24 billion in November.
According to legal documents released on June 3rd, FTX plans to only pay the IRS $200 million in priority tax claims and $685 million in secondary claims. Priority tax claims such as taxes must be paid before other debts, while secondary claims will only be paid after higher priority obligations are fulfilled.
This tax development has reduced FTX’s tax burden by tens of billions, and whether FTX creditors can receive more compensation as a result is worth continued attention.
