HomeNewsFTX Creditors' Game-Changer: 90% Asset Recovery Deal in the Works

FTX Creditors’ Game-Changer: 90% Asset Recovery Deal in the Works

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  • Lawyers representing non-U.S. creditors in FTX’s bankruptcy case are advocating for a deal promising a 90% return of the remaining assets.
  • The proposal also addresses funds withdrawn from FTX in the critical nine days before its collapse, suggesting a 15% return in exchange for immunity from bankruptcy liquidators.

Lawyers spearheading the representation of non-U.S. creditors in the FTX bankruptcy saga have secured a potential deal, poised to offer investors up to 90% of the assets still intact after the company’s financial implosion. However, it’s crucial to understand that this 90% is not a guarantee of recovering 90% of the initial investments made on, but rather a significant portion of what is left post-bankruptcy proceedings.

Understanding the 90% Deal

The essence of this arrangement is a testament to the legal prowess and negotiation skills of the creditor’s legal team, advocating for an optimal return in a dire situation. However, the outcome is still shrouded in uncertainty, as the final amount each investor stands to receive depends on the concluding balance post-liquidation.

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The proposal encompasses a critical second facet, addressing the scenario of customers who managed to withdraw assets from FTX in the precarious nine-day window prior to its downfall. These individuals would be required to return 15% of the funds withdrawn in exchange for exemption from future claims by bankruptcy liquidators.

A Critical Time for Decision-Making

“We are in a pivotal phase, aiming to circulate awareness about the deal,” expresses Sarah Paul from Eversheds Sutherland, a legal advocate for the Ad Hoc Committee of Non-U.S. Customers, representing a staggering $1 billion in claims against FTX. The ongoing legal battle involving former FTX CEO Sam Bankman-Fried has laid bare the extent of misappropriation and breach of trust, rendering the customers as the prime victims.

The bankruptcy negotiations have always been steered towards a settlement, as highlighted by Paul, with the intent of expedited financial relief for the creditors. The deadline for securing a 75% approval rate from the group of 60 individuals and entities, alongside any new members joining in the coming weeks, is set for December 1.

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Looking Ahead: The Road to Recovery

Should the settlement garner the necessary approval from creditors, it still requires the bankruptcy court’s endorsement. The overarching aim is to navigate out of bankruptcy by July 2024, unlocking the funds that have been in limbo since the previous year. The crypto industry, still in its nascent stages, does not offer a historical precedent for recovery expectations in such scenarios.

Nonetheless, even the notorious Bernie Madoff Ponzi scheme resulted in an 88% recovery for customers, providing a glimmer of hope in the tumultuous landscape of cryptocurrency exchange collapses.

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