FTX creditors to receives 118 cents on dollar, call for crypto payouts

• The recent draft recovery plan released by the bankrupt crypto exchange FTX has spurred a big jump in the value of claims.
• Most creditors could see a recovery rate of 118%.
• There is a fundamental disagreement over the recovery process, with some advocating for payouts in cryptocurrencies rather than their dollar value at the time of the exchange’s bankruptcy filing.

In a surprising turn of events, creditors of the bankrupt crypto exchange FTX might see a recovery rate of 118% according to the recent draft recovery plan. However, the payout method remains a contentious issue.

Surge in Claim Values

FTX’s claims are now trading between 101% and 112% on the crypto bankruptcy site Xclaim. This surge in claim values has been noted since the release of the draft plan, with interest from claimants, including one with a claim valued at $125 million. However, Sunil Kavuri, a representative of the largest FTX creditor group, advised against supporting the reorganization plan. Kavuri advocates for payouts in cryptocurrencies rather than their dollar value at the time of the exchange’s bankruptcy filing.

Trading Front Expectations

On the trading front, Louis Origny, CTO of claim buyer FTXCreditor, which has acquired over 2,100 claims, expects a further increase in claim buying. Origny highlighted two key reasons for this expectation: the disclosure statement’s mention of a 30% tax withholding for non-U.S. customers and the logistical challenges some claim holders may face in cashing USD checks.

Legal Action Against Lemma Technologies

Earlier in March, Attestor Capital, a London-based investment firm holding significant FTX bankruptcy claims, filed a legal action against a Panamanian company called Lemma Technologies. The lawsuit stems from Lemma’s alleged retraction of an agreement to sell two FTX accounts, valued at $166 million at the time of FTX’s collapse, to Attestor. The agreement was formed in June 2023 after Attestor placed the highest bid in an auction organized by Lemma Technologies in May 2023.

Conclusion

The FTX bankruptcy case continues to evolve, with creditors potentially seeing a higher recovery rate than initially expected. However, the method of payout remains a contentious issue, with some creditors advocating for crypto payouts. The case highlights the complex and evolving nature of bankruptcy proceedings in the crypto space.