Court Approval and Voting Process

United States Bankruptcy Judge John Dorsey accepted FTX’s voting scheme on June 25. With this consent, FTX may determine creditor preferences about the kind of repayments. Andy Dietderich, FTX’s attorney, said the vote’s goal is to get comments from a larger spectrum of FTX consumers who haven’t yet participated in debt discussions.

Current Liquidation Plan and Creditor Preferences

Calculated at the asset values from November 2022 when FTX filed for bankruptcy, FTX’s May liquidation plan projected a 118% return to 98% of creditors with claims under $50,000, which infuriated some creditors. Nonetheless, many creditors are requesting compensation in cryptocurrencies considering the 165% rise in overall market capitalization after the fall of FTX.

This Might Interest You: VanEck Files Form 8-A for Spot Ethereum ETF

For example, Bitcoin was valued at $16,900 during FTX’s bankruptcy disclosure but has since jumped 265% to $61,770. Notwithstanding this, FTX attorneys stressed that bankruptcy regulations mandate claims to be appraised at the time of the Chapter 11 filing, in line with the planned cashback schedule. The cash return schedule would also be simpler to follow and would prevent capital gain tax consequences for creditors, the attorneys further pointed out.

Implementation and Future Implications

While Judge Dorsey will rule on October 7 whether to accept the proposal, creditors have until August 16 to vote on it. Since declaring bankruptcy, FTX has recovered $11.4 billion in cash; Dietderich projects this amount to increase to $12.6 billion by October 31 should FTX’s Chapter 11 plan come into force.

Once among the biggest cryptocurrency exchanges worldwide, FTX fell in November 2022 when its trading company Alameda Research stole around $8 billion from millions of users, therefore creating a liquidity crisis. The current CEO of FTX, John Ray, keeps running over bankruptcy. In November 2023 former CEO Sam Bankman-Fried was given 25 years in jail after being found guilty of multiple fraud and money laundering allegations.

Click here to get the latest news from Coin Engineer!

The post FTX Secures Court Approval to Poll Creditors on Cash or Crypto Repayments appeared first on Coin Engineer.

Initially, the bankruptcy claim marketplace Xclaim listed Genesis claims at 35% of their value, reflecting concerns about financial stability. In any case, recent developments have changed this outlook significantly.

Court-Approved Liquidation and Payout Details

Approximately 77% of customer claims will be allocated from the $3 billion in cash and crypto distributed by Genesis, according to recently approved court orders. Specifically, the parent company of Genesis, DCG, will not receive any payout from this distribution.

The size of the creditor claims makes it clear that DCG is out of the money as an equity holder by billions of dollars, said Judge Sean Lane. The decision was reached based on the fact that the value of the Debtors’ estates was insufficient to cover DCG’s recovery after unsecured creditors are paid.

Market Adjustments and Current Trading Values

Initially, bankrupt entities were able to sell their claims for 35% of their account balance value on Xclaim at the time of listing. Currently, the trading values have improved to a significant degree. Genesis asserts that bitcoin or ether are now trading between 97-110% for claims over $10 million. The percentage at which claims for fiat currency or stablecoins trade is 89-91% for accounts valued between $1-10 million, and 73-88% for claims below $1 million.

Interestingly, despite the positives for creditors, DCG will not benefit from the recovery plan. Previously, DCG had posited a strategy of capping customer claims at the value of cryptocurrencies as of January 2023 to facilitate their own recovery. However, the court valued creditor claims using DCG’s proposed method would still leave the company billions of dollars short, according to Judge Lane.

DCG’s Financial Troubles

A 10-year promissory note would be issued in response to a 1 billion debt assumption from the Three Arrows Capital collapse. That obligation, however, did not cover the losses to a considerable degree. Moreover, DCG missed payments on Genesis’s credit line, leading to a lawsuit.

In November 2023, following a repayment agreement, DCG paid $227 to Genesis. – A total of $3 million has already been paid, with plans to pay an additional $275 million by April to settle the $620 million lawsuit over missed loan payments.

The post Genesis to Return 77% of Customer Assets in Court-Approved Liquidation Plan appeared first on Coin Engineer.