Delaware Judge Approves FTX Estate’s Bankruptcy Plan

During a six-hour-long court hearing, Judge John T. Dorsey from the U.S. Bankruptcy Court of Delaware listened to creditor arguments about lingering issues with the plan, such as objections from companies like Celsius and Layer Zero, as well as individual creditors (some represented by lawyers, some acting independently) who raised concerns over the estate’s choice to repay creditors in cash rather than crypto distributions, the evaluation of FTT tokens (valued at zero according to the estate), and the alleged property rights they claim from FTX’s terms of service. Dorsey ultimately dismissed all these objections.

Although there was extensive debate during the hearing regarding the perceived worthlessness of the FTT token, its price surged by 55% following Dorsey’s endorsement of FTX’s bankruptcy proposal.

On Monday, Brian Glueckstein, an attorney representing the FTX estate and a partner at Sullivan & Cromwell, contended that the true value of the FTT tokens held by creditors should actually be considered as nothing, and there is no justification for altering this determination.

Experts clarified that the Functional Token Token (FTT) doesn’t inherently hold any worth. It only serves a purpose within a functioning FTX.com trading platform, according to Glueckstein. Moreover, he emphasized that there will be no revival or re-launch of the FTX.com exchange.

The argument that “property rights” claims, such as creditors wanting their investments returned in cryptocurrency instead of cash or being entitled to other property within the estate, were rejected. This decision came after FTX’s legal team and expert witnesses, including Edgar Mosley from Alvarez and Marsal consulting firm, testified that it was impractical for the estate to return crypto holdings in-kind due to a lack of available assets.

The repayment capacity of the exchange is attributable to several factors:

It was pointed out that buying the exact quantity of cryptocurrency due to creditors from the open market, considering current market values, is an impractical task, a view shared by lawyers. Dorsey agreed with this assessment.

Despite ruling out direct crypto distributions, lawyers representing the FTX estate have expressed interest in offering stablecoin distributions as an alternative to creditors, and confirmed ongoing negotiations with at least four potential partners for execution. However, it’s important to note that the U.S. Securities and Exchange Commission has expressed reservations about this element of the repayment strategy.