FTX Bankruptcy Plan Approved

A U.S. judge has approved FTX’s bankruptcy plan, marking the end of proceedings following the crypto exchange’s collapse two years ago due to fraud allegations.

Judge John Dorsey, from the U.S. Bankruptcy Court for the District of Delaware, approved the plan during a hearing on Monday, enabling the distribution of funds to creditors. Under the approved plan, 98% of creditors will receive at least 118% of their claim value in cash.

“I want to say congratulations,” Judge Dorsey stated. “This is a model case for how to deal with a very complex Chapter 11 bankruptcy.”

Approximately 94% of creditors in the “dotcom customer entitlement claims” class that submitted ballots—representing about $6.83 billion in claims—voted in favor of the reorganization plan.

However, the plan faced criticism from Sunil Kavuri, a representative of the largest FTX creditor group. Kavuri argued that the estate should distribute cryptocurrencies rather than cash, as the exchange filed for bankruptcy in 2022. David Adler, a lawyer for some creditors, pointed out that cash payouts would lead to significant tax liabilities, suggesting that in-kind distributions would be more favorable.

During the hearing, Adler inquired about FTX’s exploration of in-kind distributions, but managing director Steven P. Coverick stated that the plan did not include these distributions. Coverick emphasized that the debtors did not have the required cryptocurrency to make in-kind distributions or the proportional quantities that customers believed they held.

Judge Dorsey also rejected the idea of allowing in-kind distributions and reaffirmed that FTT, FTX’s native token, holds no value, stating:

“I have no evidence today that the value of FTT tokens would be anything other than zero.”

FTT tokens were closely linked to the debtors, and with no plans to revive the exchange, there is no basis for the token’s value to increase.

FTX 2.0

The idea of an “FTX 2.0” was proposed but eventually dismissed. FTX CEO John J. Ray III mentioned in June 2022 efforts to solicit interested parties to restart the FTX.com exchange, potentially with a rebranding. However, FTX lawyer Andrew Dietderich informed the judge in January that no investors were willing to back a restart.

FTX filed for bankruptcy in late 2022. Former CEO Sam Bankman-Fried was found guilty in November 2023 on seven criminal counts, including wire fraud, and was sentenced to nearly 25 years in prison. The sister trading firm, Alameda, also failed, and its CEO, Caroline Ellison, received a two-year sentence for her involvement in FTX’s downfall. Ellison, along with former executives Gary Wang and Nishad Singh, cooperated with prosecutors, with Singh’s sentencing scheduled later this month and Wang’s in late November.