Cryptocurrency exchange FTX has stated that it expects to negotiate a reduction of the bankruptcy claim amount from the US government to $3-5 billion. FTX customers, Alameda Research as a lender, administrative expenses, and non-government creditors will all receive priority distribution.
FTX’s estimated assets of $13.7 billion are expected to cover up to $31.4 billion in legitimate claims, including $9.2 billion in customer claims and $17 billion in claims filed by the Commodity Futures Trading Commission (CFTC) and the Internal Revenue Service (IRS).
It is important to note that FTX has stated that customer repayments will be made prior to any government and tax claims, ensuring that the repayment amount for customers is not significantly diluted by these claims.
The total amount of tax claims is still uncertain, but once all government and tax claims have been paid, any remaining proceeds can be distributed to shareholders. However, FTX acknowledges that FTX investors and shareholders are likely to be harmed by the fraudulent actions of founder Sam Bankman-Fried (SBF), and they have little hope of recovering any funds from the FTX bankruptcy case.
FTX also proposes that 100% of the SDNY Remission Proceeds, funds or assets returned to FTX as part of the remission process by the US Southern District of New York Prosecutor’s Office or other government agencies, be allocated to FTX.com customers and Alameda lenders, including a settlement with BlockFi.
According to the document, after deducting administrative expenses and payments to non-government creditors, up to 25% of the distributable value will be used to pay federal income tax claims, and the remaining amount will be used to pay claims from the CFTC and other government agencies.
The payment order will be as follows:
Previously, FTX had stated in January that it expects to make “full” payments to customers, but it would be based on the cryptocurrency prices (BTC $16,871, ETH $1,258, SOL $16) at the time of the bankruptcy protection filing in November 2022, which left many FTX customers dissatisfied.
On the other hand, the law firm Sullivan & Cromwell (S&C), responsible for FTX’s bankruptcy, was accused of potential conflicts of interest and ethical misconduct. According to The Block, two law professors, Jonathan Lipson and David Skeel from Temple University and the University of Pennsylvania, respectively, stated in a recent paper that S&C used “deceptive strategies” to take control of FTX from former CEO SBF and seek personal gain from the Chapter 11 bankruptcy process.
SBF has previously accused S&C of pressuring him to file for bankruptcy protection and forcing him to appoint John Ray as CEO. FTX creditors filed a collective lawsuit against S&C last month, claiming that the firm had acted as their advisor prior to FTX’s bankruptcy, understanding the operations of the exchange and ultimately supporting fraudulent behavior. The two professors stated:
A spokesperson for S&C refuted the paper’s claims with FTX’s statement.