Cash or Crypto Comeback? FTX Creditors Get a Vote on Repayment
FTX, the once-booming crypto exchange imploded in late 2022, is asking its creditors a key question: cash or crypto? A U.S. bankruptcy judge has greenlit a vote allowing creditors to decide how they want to be repaid.
Cash Now or Crypto Gamble?
FTX’s proposed plan involves a 118% payout for most creditors (those with claims under $50,000) based on the November 2022 value of their assets in U.S. dollars. This approach aligns with bankruptcy law, according to FTX lawyers. However, some creditors see this as a disadvantage.
Why the Grumbling?
Here’s the rub: the crypto market has boomed since FTX’s collapse. Bitcoin, for example, has surged over 265%, trading at around $16,900 in November 2022 and skyrocketing to $61,770 at the time of writing. This has led some creditors to believe a payout in crypto at its current market value would be more favorable.
The Vote and Its Limits
The vote aims to gather input from a wider range of creditors. However, even if a majority prefers crypto, the court isn’t bound by the vote. The final decision rests with Judge Dorsey, who will rule in October.
FTX’s Argument for Cash
FTX lawyers highlight the benefits of their proposed cash plan:
- Easier Implementation: Cash eliminates complexities associated with crypto distribution.
- Tax Advantages: Creditors avoid potential capital gains taxes on crypto payouts.
The FTX Debacle: A Quick Recap
- Exchange Collapse: FTX was a major crypto player before its November 2022 downfall.
- Misappropriated Funds: An estimated $8 billion in customer funds were misused, causing a liquidity crisis.
- New Leadership: John Ray, a turnaround specialist, is steering FTX through bankruptcy.
- Former CEO’s Fate: Sam Bankman-Fried, the ex-CEO, was convicted of fraud and money laundering in November 2023 and sentenced to 25 years.
The Road Ahead
Creditors have until August 16th to cast their votes. Judge Dorsey will deliver his verdict on the repayment plan on October 7th. With FTX recovering over $11 billion so far (expected to reach $12.6 billion by October), the resolution of this case will be closely watched by the crypto community.
