NEW YORK — FTX, the cryptocurrency exchange that faced bankruptcy, has recently announced strong preliminary support for its reorganization plan from creditors, setting a foundation for potential recovery. The plan has reportedly received backing from over 95% of creditors, accounting for 99% of claims by value, a robust endorsement from those owed money by the beleaguered company.
John J. Ray III, the Chief Executive Officer of FTX, heralded this overwhelming support as a crucial step forward. He elaborated that the plan not only aims at reimbursing 100% of bankruptcy claim amounts plus interest for non-governmental creditors but also at resolving disputes involving various stakeholders, both governmental and private.
Despite the broad approval, some detractors have voiced concerns over the methodology used to value the assets involved. Specifically, they criticize the use of November 2022 prices—the point at which FTX declared bankruptcy—as the basis for calculations, rather than current market values which could potentially be higher and more beneficial for the creditors.
Nevertheless, the FTX leadership remains optimistic. With such significant creditor support, they believe the reorganization plan will convincingly meet, if not exceed, the acceptance benchmarks mandated by the U.S. Bankruptcy Code. The final vote results are set to be submitted to the U.S. Bankruptcy Court for the District of Delaware, with a confirmation hearing scheduled for October 7, 2024.
In a parallel development, the situation around FTX continues to evolve as Ryan Salame, a former executive of the exchange, has initiated legal action against the U.S. government. On the same day as the announcement of the creditor support, Salame filed a lawsuit alleging that the government failed to uphold a promise made during his plea deal negotiations. The promise reportedly involved refraining from pursuing campaign finance charges against his partner, Michelle Bond.
Expressing his apprehensions and resolve on the social media platform X, Salame stated his intentions were to expose what he termed “un-American tactics” used against him and others. This legal move comes amid Salame’s broader legal issues, including a forthcoming 7.5-year prison sentence and significant financial penalties amounting to over $11 million in forfeiture and restitution.
Salame’s allegations and legal actions add another layer of complexity to the FTX saga, intertwining legal, political, and personal dimensions that highlight the broader implications of the exchange’s collapse.
This unfolding scenario presents a critical juncture not only for FTX and its creditors but also for the regulatory environment surrounding cryptocurrency exchanges. As FTX navigates its path through legal and financial remediation, it casts a sharp light on the volatility and regulatory challenges inherent in the cryptocurrency market, reminding stakeholders of the high stakes involved in this still-evolving financial landscape.