Recent bankruptcy documents from FTX creditor Sunil Kavuri reveal troubling news for FTX creditors. Due to how repayments are structured, many may only recover between 10% and 25% of their cryptocurrencies. The amounts returned will be based on cryptocurrency prices from the filing date, which were significantly lower than current market values. For instance, at that time, Bitcoin was priced around $16,000.
This decision to use the filing date to determine the repayments has been a cause of concern to creditors since it has caused dissatisfaction. Therefore, it is not uncommon for many people to feel that they have been frustrated. Moreover, a fresh term has emerged regarding how the defunct cryptocurrency trading platform intends to distribute money. FTX will allocate up to $230 million from the government forfeiture proceedings to the preferred shareholders. This was entirely unexpected for many creditors.
In fact, in companies that have gone bankrupt, the creditors are paid before the shareholders. However, this new agreement was revealed to the creditors after they voted massively to support the repayment plan before the August 16 deadline. Sunil Kavuri, an attorney for the largest FTX creditors, has raised concerns. He said, “Ordinary creditors had no input.” Many FTX customers feel scammed and robbed once more about the situation.
Bankruptcy Documents Estimate FTX Forfeiture Actions at $1.19 Billion
Under the terms of the latest deal, FTX’s estate, administered by Sullivan and Cromwell lawyers, will transfer 18% of the revenues from government forfeiture actions to a special fund. This will benefit specific shareholders, totaling up to $230 million. This was signed on August 28, almost two weeks after creditors’ voting deadline. This was announced on September 27, the last day for the estate to file its revised plan.
According to the bankruptcy documents, the total of the forfeiture actions is estimated at $1.19 billion. This comprises approximately $626 million from the Emergent entity linked to Robinhood shares, $379 million in secured assets, $150 million in cash, and two private planes bought from estate funds.
Lastly, Kavuri highlights that the actual picture differs from what FTX expects from its bankruptcy plan. It suggests that around 98% of the creditors will be paid at least 118% of their claim value in cash. Because the claims in the bankruptcy were made in relation to the value of cryptocurrencies at their current value, a large number of creditors might receive only between 10% and 25% of their crypto back.
