NASSAU, BAHAMAS — FTX’s reorganization is encountering legal challenges despite reportedly receiving majority support from all classes of creditors. The issues come as its US Trustee has raised objections to the plan’s implementation.
FTX, the now-bankrupt former crypto trading platform giant, announced that its amended reorganization plan, filed with the United States Bankruptcy Court for the District of Delaware, has garnered overwhelming preliminary support from creditors entitled to vote, including customer classes from FTX US and FTX.com. According to unofficial voting reports, over 95 percent of creditors who cast their votes favored the plan, representing 99 percent of the total value of voted claims.
FTX indicated that more than two-thirds of all solicited claims by voting value participated in the solicitation process. The company believes this level of support will help the plan meet the required acceptance thresholds under U.S. bankruptcy law. Final voting results will be filed with the court before the confirmation hearing scheduled for October 7, 2024.
John Ray III, FTX’s Chief Restructuring Officer and CEO highlighted the robust voting participation as a sign of strong support for the reorganization plan. He stated, “Importantly, the Plan’s innovative structure provides for the return of 100 percent of bankruptcy claim amounts plus interest for non-governmental creditors and resolves complex disputes with dozens of governmental and private stakeholders.” Ray also expressed gratitude for the ongoing collaboration with stakeholders and emphasized FTX’s commitment to working with creditors and the court in the coming weeks.
However, the reorganization plan faces legal hurdles from U.S. Trustee Andrew R. Vara and a group of creditors. Vara has raised ten concerns about the plan, including issues with the legal protections granted to bankruptcy participants, perceived unfair treatment of smaller creditors, and disputes over expenses related to a data breach suffered by an estate service provider. Vara argues that the estate’s professionals are demanding excessive compensation for addressing the breach and that smaller creditors are being unfairly compensated compared to larger ones. Additionally, Vara criticized the plan’s broad immunity provisions, which he believes extend beyond what is permitted by law.
FTX will submit the final voting results to the United States Bankruptcy Court for the District of Delaware ahead of the confirmation hearing on October 7, 2024.
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