More than a year after filing for Chapter 11 in the District of Delaware, FTX Trading Ltd. (dba FTX.com) and its affiliated debtors filed the amended Plan of Reorganization and accompanying Disclosure Statement in the United States Bankruptcy Court for the District of Delaware.
Subject to finalization and approval by the Bankruptcy Court, plan contemplates the centralized distribution to customers and other creditors worldwide of virtually all assets related to FTX at the time of its collapse in November 2022, regardless of where the assets were located at the time.
FTX anticipates that the total value of assets collected, cashed and available for distribution will be between $14.5 billion and $16.3 billion. This amount includes assets under the control of the Chapter 11 debtors as well as assets under the control of the Joint Official Liquidators of FTX Digital Markets, Ltd. (Bahamas), the Bahamas Securities and Exchange Commission, the Joint Official Liquidators of FTX Australia, the United States Department of Justice and dozens of private parties who have cooperated in the recovery efforts.
The Plan provides for full payment of all non-governmental creditors based on the value of their claims as determined by the Bankruptcy Court. In addition, the Plan provides for a subordination agreement with governmental creditors that allows interest to be paid to principal classes of customers and creditors at a rate of up to 9% (the “Consent Rate”) from the commencement of the chapter 11 cases until the date of distribution. There may also be an opportunity for certain creditors to receive additional payments through the Supplemental Write-Off Fund described in Section 1.F of the Disclosure Statement.
For creditors who have claims in an allowable amount of $50,000 or less, the Program creates a special “comfort class.” Because of this classification, if the Plan is approved by the Bankruptcy Court, the Debtors expect that 98% of FTX’s creditors by number will receive approximately 118% of the amount of their allowed claims within 60 days of the effective date of the Plan. subject to customer and distribution information requirements.
At the heart of the Plan are a series of arrangements reached by consensus with key economic operators.
Key settlements (including those still subject to finalization and approval by the Court) include:
- Resolving $24 billion in claims filed by the Internal Revenue Service for periods prior to the chapter 11 cases in exchange for a $200 million cash payment and $685 million of subordinated liens to rank below the claims of all creditors and government bodies.
- Proposed agreement with the Internal Revenue Service to also condition tax claims arising after the commencement of chapter 11 cases on the payment of creditors in full with interest at the agreed rate.
- Proposed agreement with the Commodity Futures Trading Commission and possibly other government claimants to both condition their claims on the payment of non-government creditors in full with interest at the consensus rate and to contribute any recoveries of these subordinated claims to a special fund created by the Debtors for purposes of additional compensation to certain customers and creditors. The Debtors have proposed that the Supplementary Write-Off Fund be made available to all customers and lenders of digital assets. Details of this agreement remain to be finalized.
- A proposed agreement with the Department of Justice under which more than $1.2 billion in forfeiture proceeds can, if the Department of Justice so decides, be distributed to customers and creditors through chapter 11 cases without additional administrative costs or delay.
- The previously disclosed customer property settlement with the Non-U.S. Customer Ad Hoc Committee, Class Action Claimants and the Official Committee of Unsecured Creditors, which provides for the settlement of customer property claims in exchange for special priority for customers in the plan.
- The previously approved arrangement with the joint official liquidators of FTX Digital Markets, Ltd. (“FTX DM”), which allows FTX.com customers to elect to settle their claims in either the Chapter 11 cases or the liquidation of FTX DM with equivalent financial results.
- The previously approved settlement with BlockFi, FTX’s largest creditor.