FTX has been granted approval by a US bankruptcy court to proceed with a liquidation plan that involves paying customer claims in cash, as reported by Reuters. This plan overrides objections from customers who argue for higher payouts due to the increase in crypto prices since FTX’s collapse in November 2022.
Customer Concerns and Objections
Creditors have raised concerns about the cash payment plan, pointing out that customers would receive significantly less based on the crypto prices at the time of FTX’s collapse. Some creditors have objected to FTX’s portrayal of the plan as a “full recovery with interest,” stating that it is misleading and does not reflect the actual situation.
FTX CEO John J. Ray III defended the cash payment plan, stating that the company cannot return the crypto that customers had deposited due to its financial shortfall at the time of bankruptcy. Ray emphasized that the company simply does not have the funds to repay customers based on current crypto prices, as they no longer hold the assets.
Amounts Owed to Creditors
Ray clarified that the liquidation plan cannot increase the amounts owed to certain creditors, and attempting to do so would take money away from other customers. He also mentioned that most customers are expected to receive the total amount owed within 60 days of the court approving FTX’s wind-down plans, with a faster payment option available for claims under $50,000.
Reports indicate that FTX currently has $11.4 billion in assets, with the potential to increase this to $12.6 billion by the end of October. Despite the controversy surrounding the cash payment plan, FTX is focusing on finalizing the liquidation process and ensuring that customers receive their owed amounts in a timely manner.
The approval of FTX’s liquidation plan has sparked debate and dissatisfaction among creditors who feel that they are not being fairly compensated. While FTX has justified its decision based on financial constraints, the discrepancy between the cash payments and current crypto prices remains a point of contention. As the company moves forward with the liquidation process, it will be essential to address customer concerns and ensure transparency in its dealings to maintain trust and credibility in the market.
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