[Updated] FTX Receives U.S. Bankruptcy Court Confirmation of its Plan of Reorganization

Update: FTX Trading Ltd. (d.b.a. FTX.com) and its affiliated debtors (“FTX” or the “Debtors”) today announced that the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court” or the “Court”) has confirmed FTX’s Plan of Reorganization (the “Plan”), less than two years after its historic bankruptcy filing.

Under the terms of the Plan, 98% of the creditors of FTX by number will receive approximately 119% of the amount of their allowed claims within 60 days after the effective date of the Plan, subject to know-your-customer and other distribution requirements. FTX projects that the total value of property collected, converted to cash and available for distribution will be between $14.7 billion and $16.5 billion. This amount includes assets under the control of the chapter 11 Debtors as well as assets under the control of the Joint Official Liquidators of FTX Digital Markets, Ltd. (Bahamas), the Administrators of FTX Australia, the United States Department of Justice and dozens of private parties that have cooperated in the recovery efforts. The Debtors will separately announce in due course the Plan’s effective date and estimated first distribution date.

John J. Ray III, Chief Executive Officer and Chief Restructuring Officer of FTX, said: “The Court’s confirmation of our Plan is a significant milestone on our pathway to distributing cash to customers and creditors. Today’s achievement is only possible because of the experience and tireless work of the team of professionals supporting this case, who have recovered billions of dollars by rebuilding FTX’s books from the ground up and from there marshaling assets from around the globe. It also reflects the strong collaboration we have had with governments and agencies from around the world that share our goal of mitigating the wrongdoings of the FTX insiders.”

Mr. Ray added: “Looking ahead, we are poised to return 100% of bankruptcy claim amounts plus interest for non-governmental creditors through what will be the largest and most complex bankruptcy estate asset distribution in history. The estate is working to finalize arrangements to make distributions to creditors across more than 200 jurisdictions around the world. In preparation for this process, we are finalizing agreements to retain specialized agents to assist us in getting recoveries to customers around the world as safely and expeditiously as possible. I want to thank all customers and creditors of FTX for their patience throughout this process.”

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The FTX bankruptcy case has been a focal point in the cryptocurrency world, highlighting the volatility and risks inherent in the market. Today marks a significant moment in the ongoing saga as the confirmation hearing on creditor fund distribution is set to occur. This hearing is a critical step in determining how the funds will be allocated among the creditors who were affected by the collapse of the exchange.

The anticipation surrounding the hearing is palpable, as it will set the precedent for how such cases may be handled in the future. The outcome is particularly important for the crypto community, as it will influence the market’s stability and investor confidence moving forward.

The hearing follows a series of events that have unfolded since FTX’s bankruptcy filing. There have been widespread discussions and debates on the best approach to reimburse the creditors, with the bankruptcy estate proposing a plan that has gained overwhelming support from the creditors. However, the plan has faced opposition, particularly regarding the form of reimbursement—whether it should be in cash or in-kind assets like cryptocurrency.

The U.S. Securities and Exchange Commission (SEC) has also played a role in the proceedings, indicating that it may challenge any transactions of distributions involving crypto assets. This adds another layer of complexity to the hearing, as the legal and regulatory frameworks for cryptocurrency are still evolving.

The FTX creditor fund distribution plan has been a subject of intense debate, with various stakeholders presenting arguments for and against the proposed strategy. The plan promises a high recovery rate of 118% of claims in cash for most creditors. It aims to provide swift compensation, with 98% of creditors receiving their funds back in cash within 60 days of court approval.

A significant majority of creditors, about 94%, have voted in favor of the reorganization plan, indicating strong support from those affected. Some creditors have expressed a preference for compensation with in-kind assets rather than cash, arguing that this could potentially avoid a taxable event.

Creditors are concerned about being excluded from the market recovery, as they have missed out on the opportunity to profit from the run-up in crypto prices while their funds were tied up. The U.S. Securities and Exchange Commission may pose challenges, especially regarding the use of stablecoins for repayments, adding a layer of complexity to the plan’s execution.

The confirmation hearing is set to address these arguments, and the outcome will have significant implications for the creditors and the broader cryptocurrency market. The court’s decision will be closely watched as it will set a precedent for future bankruptcy cases involving digital assets.

The market has responded to these developments, with the FTX Token experiencing a significant spike in value amid the looming bankruptcy distributions. This reaction underscores the interconnectedness of legal proceedings and market dynamics in the crypto space.

As the hearing unfolds, stakeholders from across the industry will be watching closely. The decisions made by Judge John T. Dorsey of the United States Bankruptcy Court for the District of Delaware will not only affect the immediate distribution of funds but also set a benchmark for future bankruptcy cases involving cryptocurrencies.

The FTX confirmation hearing is more than just a legal procedure; it is a testament to the growing pains of a burgeoning industry. It serves as a reminder of the need for robust legal frameworks and clear regulatory guidelines to protect investors and maintain market integrity.

The cryptocurrency market is still in its infancy, and the FTX case is a pivotal moment in its maturation. The outcome of today’s hearing will likely resonate for years to come, influencing the policies, practices, and perceptions of this innovative yet unpredictable sector.