FTX customers could get deciding vote on bankruptcy hand-outs

June 25, 2024
Darren Parkin

THE custodians of collapsed cryptocurrency exchange FTX will this afternoon be addressing a bankruptcy court to seek permission to allow its customers to vote on a liquidation plan.

The plan, if approved by US Bankruptcy Judge John Dorsey, would open the doors for customers to be repaid in cash. Some customers, however, are holding out for a larger pay out.

FTX's current board has so far recovered almost $16 billion which is being held in waiting, ready to be repaid. Three quarters of that figure is in US dollars rather than crypto. The company says it has the capacity to return all funds to all customers.

It will begin the process if it gets the green light to open voting on the winding down plans at court in Delaware today.

However, a growing number of FTX customers are urging the court to reject the plans, stating the repayments are based on cryptocurrency prices when the exchange collapsed in November 2022. They argue their funds should be tracked in line with current - much higher - crypto prices, as they had no access to the funds they held with the exchange.

"Customers must be made aware that the plan's 'full recovery' is nothing of the sort," their written objection stated.

Meanwhile, John Ray - FTX's current CEO - countered by saying the cryptocurrency could not be restored as much of it was stolen by the founder and former CEO Sam Bankman-Fried who recently began his 25-year jail sentence. Ray added he believed cash payments were the fairest settlement.

"FTX.com had a massive shortfall at the time of the Chapter 11 filing in November 2022 – holding only 0.1% of Bitcoin and only 1.2% of the Ethereum customers believed the exchange held," Ray said.

"We cannot give tokens back that we never had. We cannot pay one creditor more without taking it from another creditor.

"Those arguing for appreciation of 'their' tokens would be taking money away from fellow customers who held cash, stablecoins or other crypto."

If the disclosure statement from FTX is approved by Judge Dorsey, ballots must be cast by creditors before Friday August 16.