The US Trustee had initially flagged concerns about disparities within the previous motion.
A new development has surfaced in the ongoing bankruptcy proceedings of the defunct cryptocurrency exchange FTX. The troubled company has revised its proposed settlement plan after the US Trustees rejected its initial proposal. According to a court document filed on August 20, FTX debtors have filed a motion to modify its proposed settlement plan to address the trustees’ concerns and ensure the smooth continuation of the process.
US Trustees Cite Concerns about Lack of Clarity
The US Trustee had initially flagged concerns about disparities within the previous motion. Specifically, the Trustee questioned the designation of a $10 million threshold as appropriate for a minor claim. Additionally, there were concerns about the clarity surrounding the nature of the asserted claims.
Initially, the FTX debtors criticized the US Trustees as the sole objectors to the proposed “Motion”, claiming they attempted to “interfere in a routine settlement process that is already well-protected by two distinct creditor committees”.
However, the exchange has changed heart and filed to modify its settlement plan to include the trustees as a “noticed party” throughout the restructuring process.
Furthermore, the debtors also proposed reducing the maximum claim value, dropping the figure from the earlier $10 million to a more modest $7 million.
An Attempt at Reconciliation
FTX debtors have committed to regular updates on settled claims as part of their proactive approach. These updates will be provided monthly.
It is important to note that any concerns raised by notified parties must be addressed for a claim to advance. If an amicable resolution cannot be reached, the court’s intervention will be sought for a final decision.
The settlement process is being driven by two key creditor committees: The Official Committee of Unsecured Creditors and the ad hoc Committee representing international stakeholders. These committees are instrumental in ensuring fairness and equity throughout the settlement proceedings.
Trouble in Paradise
FTX, which held the title of the world’s second-largest exchange after Binance, started its bankruptcy proceedings earlier this year after its collapse in November 2022.
Recall that the company, which was then valued at around $32 billion, had suffered a brief liquidity crisis last year before ultimately filing for bankruptcy. The company’s founder Sam Bankman-Fried (SBF), was accused of mismanaging customers’ funds, and he is currently facing many criminal charges in the United States for his role in the collapse of the exchange.
Earlier this month, a judge issued a ruling that resulted in the placement of the disgraced FTX founder within the confines of the Brooklyn Metropolitan Detention Center (MDC) after he was deemed to have violated his bail conditions.
However, in a surprising turn of events, SBF is now seeking release under specific and unique circumstances. In an August 18 letter to US District Judge Lewis Kaplan, his lawyers have asked for SBF to be released during the weekdays to enable him adequately prepare for his defense. If approved, the former FTX CEO will only spend weekends in jail.