FTX Sets Aside $230M for Shareholders; Snubs Creditors Amid Payout Plan Controversy
FTX creditors are enraged as the defunct crypto exchange prioritizes shareholder compensation, setting aside $230 million,18% of forfeited assets, amid creditor financial struggles to compensate certain shareholders
As revealed in a recent court filing by Sunil Kavuri, a vocal advocate for FTX creditors, the defunct crypto exchange will set aside $230 million (18% of forfeited assets) from the Department of Justice (DOJ) to compensate shareholders who owned equity before its collapse through a specialized remission fund.
FTX formally finalized the agreement on August 28 but kept its details a secret until the company released it between September 27 and 30, nearly a month after the creditors’ voting deadline.
A part of the court filing read, “As, when and to the extent the Debtors receive Forfeiture Proceeds from the DOJ, the Debtors shall deposit 18% of such Forfeiture Proceeds into a segregated fund (the “Preferred Shareholder Remission Fund”) for the exclusive benefit of the Preferred Shareholders, provided that the total amount of such Forfeiture Proceeds deposited in the Preferred Shareholder Remission Fund shall not exceed $230 million.”
According to a June filing, the total forfeited assets are estimated at $1.19 billion. The amount includes $626 million seized from Emergent, an entity used to buy Robinhood shares and other assets.
Additionally, the authorities secured $379 million worth of digital assets from third-party crypto exchanges and seized $150 million in cash from FTX DM accounts. They also recovered two private planes worth $35 million. The government seized or secured these assets and will distribute them as part of FTX’s bankruptcy proceedings.
Creditors Express Outrage Over FTX’s Controversial Payout Plan
In addition to FTX prioritizing repayment of shareholders to creditors, the defunct crypto exchange plans to repay creditors only 10-25% of their lost assets as they will calculate repayments using 2022 bankruptcy filing prices.
At that time, Bitcoin was selling at $16,000. This results in creditors receiving significantly less than their original investment.
FTX’s recent approach to its repayment plan has generated intense anger and feelings of betrayal among affected creditors. The mood among FTX creditors has soured, contrasting with the optimism that followed after a New York judge gave the green light to FTX and Alameda Research to pay out a whopping $12.7 billion to creditors, marking the end of a lengthy 20-month lawsuit filed by the Commodity Futures Trading Commission (CFTC).
