FTX creditor representative Sunil Kavuri expressed opposition to FTX’s bankruptcy reorganization plan in a post yesterday, rejecting the implementation of the plan for three reasons.
Table of Contents
Not in the best interests of creditors
Creditors have losses exceeding $10 billion
Can FTX pay back more money?
Since the closure in November 2022, the reorganization team of the bankrupt cryptocurrency exchange FTX has been actively raising funds to repay creditors. According to the latest repayment plan released by the reorganization team last month, the estimated amount owed is $11.2 billion, but after the sale of assets, they will have approximately $14.5 billion to $16.3 billion in cash available for compensation. Therefore, the vast majority of users (those who held funds of $50,000 or less) can receive approximately 118% cash compensation.
However, it is important to clarify that the loss compensation is calculated based on the platform funds of FTX on the day of the bankruptcy filing under Chapter 11 of the bankruptcy law. So unless the assets held by users in FTX are stable coins, they are still at a significant loss (BTC was only $17,000 at the time)…
The current progress indicates that creditors may be repaid as early as this year. However, the community-initiated FTX creditor group has once again opposed the bankruptcy reorganization plan.
Representative Sunil Kavuri of the FTX creditor group posted on social media yesterday (6), stating that the Creditors’ Committee (CAHC) is against FTX’s bankruptcy reorganization plan, citing multiple reasons for rejecting the plan:
Repaying in cash will trigger tax events, causing creditors unnecessary costs, and proposing to repay assets in kind as an alternative.
Creditors invoke Chapter 11 of the bankruptcy law to oppose releasing funds to the debtor (FTX bankruptcy reorganization team), claiming they are trying to distribute stolen assets.
Not in the best interests of creditors.
Additionally, Kavuri mentioned other arguments against the plan, including the need to update the IRS settlement disclosure statement, undisclosed litigation procedures, inconsistencies in debtor clearance analysis, and objections to the timing schedule.
According to previous reports, Sunil Kavuri suggested in a post on August 8th that creditors should vote against FTX’s reorganization plan:
It can be seen that Kavuri’s assets at the time of FTX’s closure were mostly stored in the form of spot tokens, which is why he is particularly dissatisfied with this compensation plan.
On the other hand, FTX has made significant progress in tax matters. In April last year, the IRS requested FTX to pay $44 billion in unpaid taxes, which was later revised to $43 billion in September and further reduced to $24 billion in November.
According to legal documents released on June 3rd, FTX plans to only pay the IRS $200 million in priority tax claims and $685 million in secondary claims. Priority tax claims such as taxes must be paid before other debts, while secondary claims will only be paid after fulfilling obligations of higher priority.
This tax development has reduced FTX’s tax burden by tens of times, and whether FTX creditors can receive more compensation as a result is worth continued attention.