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FTX restructuring hearing scheduled for 10/7, planning to allocate an additional $200 million to shareholders?

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FTX restructuring hearing scheduled for 10/7, planning to allocate an additional $200 million to shareholders?

According to the revised bankruptcy filing shared by FTX creditor Sunil Kavuri, FTX is set to extract profits of up to $230 million from government seizure actions for the benefit of certain shareholders.

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FTX's Additional $200 Million Transfer to Shareholders, Giving Priority to Shareholders over Creditors?

FTX's bankruptcy plan concluded voting on 8/16 with overwhelming support, but FTX creditor Sunil Kavuri revealed an additional clause that would set aside up to $230 million for preferred stock shareholders, severely affecting the rights of creditors.

According to a report by The Block, this agreement was finalized after the deadline for creditors to vote on the plan and was disclosed thirty days later at the maximum time allowed by law, leaving some creditors surprised and angered as they were unaware of this provision.

In traditional bankruptcy liquidation processes, shareholders are compensated last, but FTX argues that compensating shareholders will help avoid costly litigation and delays related to forfeiture proceeds.

FTX is transferring 18% of the funds seized by the U.S. Department of Justice (DOJ) to FTX equity holders, up to $230 million. This includes cash, Robinhood stocks, private jets, valued at $1.19 billion as of the end of June, with FTX equity holders set to receive $214.2 million.

Cryptocurrency Holders to Receive Only 10%-25% of Cryptocurrency Returns?

Kavuri stated that FTX cryptocurrency holders will only receive 10%-25% of cryptocurrency returns, while creditors had the potential to claim more.

Reports from May indicated that the total assets FTX expected to distribute ranged from $14.5 billion to $16.3 billion. With approval from the bankruptcy court, 98% of FTX creditors are expected to receive 118% of their allowed claims within 60 days of the plan's effectiveness. The additional amount disclosed by Kavuri should be from judicial forfeiture. The estimated 10%-25% is mainly due to the significant difference in cryptocurrency prices from the time of bankruptcy filing to the present, for example, Bitcoin was at $16,000 during the bankruptcy filing, but is now at $65,000. Creditors should base their claims on the dollar amount stated in the initial claim documents.

The confirmation hearing for FTX's restructuring plan is currently scheduled for October 7th, where U.S. Bankruptcy Court Judge John Dorsey of the District of Delaware will decide whether to approve the plan.