- Andrew Vara, a US trustee, has pointed out flaws in the FTX reorganization plan.
- A group of creditors also asked for the FTX estate to change the mode of repayment to cryptocurrency.
As a seasoned crypto investor with over a decade of experience navigating the volatile and often unpredictable world of digital assets, I find myself closely following the FTX saga with a mix of concern and intrigue. The latest developments, as highlighted by Andrew Vara’s objections to the current reorganization plan and the demands from a group of creditors for repayment in cryptocurrency, have caught my attention.
The appointed US trustee for FTX and a number of FTX’s creditors have raised concerns about the current reorganization plan. They are advocating for a more suitable reorganization to address their needs effectively. Although approximately 95% of FTX creditors supported the chosen path, these objections could prompt FTX to reconsider and possibly revise its plan in order to better serve all parties involved.
Andrew Vara highlighted several issues, such as the high degree of legal protection granted to the estate’s managers and counsel. In essence, this immunity could nullify exceptions for severe negligence, intentional wrongdoing, and fraud. Moreover, the extent of this immunity surpasses the safeguards afforded to estate professionals whose employment and payment are under court scrutiny during the proceedings.
Furthermore, Vara asserted that the difference in recovery amounts for certain creditor groups is unjust. The proposed plan aims to offer refunds equaling 119% of the lost funds for creditors who owe less than $50,000; however, those owing more will receive up to 143%. He contended that the FTX estate possesses sufficient resources to distribute equal compensation proportionally among all FTX creditors.
On the specified date, it was contended that the Debtors would possess sufficient funds readily available to compensate convenience claimants at the same level as other claimants from regular customers, since there appears to be no distinguishable legal characteristics between their claims.
He has similarly raised doubts about the massive amounts billed by Kroll’s executives in relation to a “data breach” – with Kroll being a service provider for FTX’s creditors. In simpler terms, “[…] the professionals representing the creditors have charged millions of dollars in fees due to the data breach.”
FTX Creditors Demand Repayments in Cryptocurrency
According to the US trustee’s observations, a significant number of FTX creditors, headed by Sunil Kavuri, have highlighted a major problem with the reorganization procedure. They argue that the estate paying the creditors in traditional fiat currency causes unnecessary tax obligations for them. Additionally, Kavuri referenced the BlockFi case where creditors received their returns in cryptocurrency, suggesting that FTX could follow suit to ease the process for its own creditors.
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2024-08-26 17:00