Judge Approves FTX Bankruptcy Plan
A judge approved FTX’s bankruptcy plan, allowing the failed crypto exchange to move closer to repaying creditors and winding down operations.
FTX’s bankruptcy plan has been approved by Judge John Dorsey after a long court session on Monday. This brings the collapsed crypto exchange one step closer to winding down its operations, a major milestone in its ongoing legal process. The judge described the plan as a “model case” for handling such a complex bankruptcy.
The plan, which gained strong support from creditors, was submitted to the Delaware Bankruptcy Court earlier this year. It proposes to distribute funds based on the value of crypto assets in November 2022. However, there was a heated debate over whether to distribute the funds in cash or crypto. Many former customers wanted in-kind payments in the form of digital currencies instead of cash.
During Monday’s hearing, a representative from Alvarez & Marsal, Steven Coverick, said that FTX simply “never had the crypto” to make these distributions. He explained that the estate did explore ways to return crypto to customers, but the costs would have reduced the total amount recovered.
The FTX estate reportedly owes creditors around $11 billion but has recovered between $14.5 billion and $16.3 billion in cash assets. While some argued for crypto returns, Coverick noted it would “run up” the market and make it costly to execute.
The approved plan does not completely rule out payments in stablecoins, which are considered a more practical option. According to a May court filing, 98% of non-government creditors will receive at least 118% of their claims in cash within two months after the plan’s implementation.
The hearing is just another chapter in FTX’s legal drama, which started in November 2022. Since then, former CEO Sam Bankman-Fried has been tried and found guilty, receiving a 25-year prison sentence. Former Alameda CEO Caroline Ellison received a two-year sentence, while Ryan Salame faces seven and a half years. Other executives, Nishad Singh and Gary Wang, who testified at Bankman-Fried’s trial, are awaiting sentencing next month.
The ruling marks a significant step toward wrapping up the fallout of FTX’s collapse. As the company winds down, the plan ensures some return for creditors, but the controversy surrounding the distribution method remains unresolved for some former customers.
