Judge approves FTX bankruptcy plan
FTX “never had the crypto” to make in-kind distributions, witness says at FTX’s confirmation hearing
CryptoFX/Shutterstock modified by Blockworks
The FTX estate appeared in front of a court Monday for a hearing centered on its bankruptcy
plan, which was proposed back in May of this year.
After a hearing that spanned most of Monday, bankruptcy court Judge John Dorsey signed off on the plan, allowing FTX to move one step closer to fully winding down.
The judge praised the plan, calling it a “model case” for a “complicated” bankruptcy.
FTX’s plan, which received “overwhelming” support from creditors, was presented to the Delaware Bankruptcy Court for confirmation. However, there’s been plenty of controversy around the plan, which would — upon winding down — distribute funds to creditors based on the asset prices of crypto back in November 2022.
Read more: Why FTX is different from other crypto bankruptcies
Former FTX customers had previously fought for distributions to be made in-kind, meaning that customers would receive crypto instead of payments in cash.
However, during a cross-examination during Monday’s hearing, Alvarez & Marsal’s Steven Coverick told the court that the debtors didn’t have the crypto in order to make in-kind distributions. Coverick and his firm worked with the debtors on the plan.
FTX, he added, “never had the crypto.”
The estate, per the May filing, owes creditors roughly $11 billion, and has managed to find somewhere between $14.5 billion and $16.3 billion in cash.
The hearing Monday confirmed that the estate researched ways to return crypto back to former customers, but it would have been expensive and would have lowered the amount returned, Coverick added.
Due to the way in which the estate would have to go about purchasing the crypto, the purchases would potentially “result in a run-up in the market,” he told attorney David Adler.
The plan, however, doesn’t rule out distributions made in stablecoins.
Per a May court filing, 98% of non-government creditors will receive “at least” 118% of claims in cash within two months of the plan being approved.
The hearing marks another milestone in the saga of FTX, which is coming up on the two-year anniversary of its collapse. Since the November 2022 crash, former CEO Sam Bankman-Fried has both been tried in court and found guilty. He is serving a sentence of 25 years. Former Alameda CEO Caroline Ellison has also been sentenced, she faces two years in jail. FTX executive Ryan Salame faces a sentence of seven and a half years in jail.
Nishad Singh and Gary Wang, both executives who testified at Bankman-Fried’s trial last year, are set to be sentenced next month.
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