Interpretation of FTX's preliminary restructuring plan: all non-customer claims will be in a subordinate position, and the amount of FTT claims will be zero

Original Author: Nancy, PANews

Thousand times Memecoin BALD is rumored that SBF is behind the scenes. Although it may be a rumor, at the same time the FTX restructuring plan was confirmed. On August 1, according to a tweet from the FTX 2.0 creditor alliance, FTX has submitted a preliminary restructuring plan and term sheet, key information including all non-customer claims will be included as secondary, FTT claims will be zero and restart offshore Exchanges to compensate for customer shortfalls.

It should be noted that the current FTX restructuring plan is still in its infancy. The team will submit a revised plan and disclose a statement in the fourth quarter of 2023 based on creditor feedback in order to reach a consensus and get out of bankruptcy.

Prorated payout in USD, FTT claims canceled

"Excited to submit a commitment to a restructuring plan at a relatively early stage, FTX intends to work with creditors in the coming months and file a revised plan and disclosure statement in the fourth quarter of 2023." FTX CEO John J . Ray III said. In fact, according to the Chapter 11 bankruptcy law of the United States, the debtor must submit two important documents to the court during the bankruptcy reorganization process, namely the reorganization plan and the disclosure statement.

FTX pointed out in the reorganization documents that, considering that the FTX bankruptcy case involves very large and complex debt claims, causes of action and disputes, including claims against debtors and inter-company claims of different debtors against other debtors, this FTX The announcement of the restructuring plan aims to provide a sincere solution to the world.

According to the reorganization documents, FTX will repay through the sale of various FTX assets, mainly including three recovery pools, namely FTX.com customer-related assets, related assets attributable to FTX US customers, and assets that the debtor believes are not clearly attributable to transactions. other assets of the firm.

At the same time, FTX has also classified creditors, but almost all of the proposed creditor categories are listed as "incomplete", which means that FTX does not expect creditors to receive full compensation and will pay a certain percentage in US dollars.

Creditors are classified as priority creditors, secured creditors, users of FTX Offshore Trading (referred to in the filing as "Dotcom Claimants"), FTX US users, NFT holders, general unsecured creditors, subordinated creditors and subordinated bonds, the documents show. etc., but administrative claims and certain other special priority claims will be unclassified and will be paid in full in cash in accordance with the Bankruptcy Code. Of these, 7 classes of creditors are required to be allowed to vote on this restructuring plan, while FTT holders (whether held on the FTX exchange or not), preferred equity and equity investors, and other related claims are canceled without any claim .

The priority of creditor's rights will be determined in accordance with the "waterfall priorities" (waterfall priority), and each type of creditor will be repaid in proportion from the remaining pool of creditors after the creditor's rights of the previous type of creditors are satisfied. The exact sequence of payments is determined after consultation with stakeholders.

Or re-establish the exchange, users can choose debt-to-equity swap

In addition, the reorganization document also pointed out that creditors can choose to pool their assets to create an offshore exchange, that is, forgo cash payments to buy shares in the new exchange. “The debtor can decide whether to elect to have the offshore trading company repay in the form of or invest in equity securities, tokens or other interests in those shares, tokens or interests.”

However, FTX also emphasized that the plan is still in its infancy and is subject to change. It will be revised based on feedback from consultants and other stakeholders, and a revised restructuring plan will be submitted in the fourth quarter of 2023.

Not long ago, John Ray revealed that FTX has "began to solicit interested parties to restart the FTX.com exchange." FTX has been in talks with investors about a possible restart financing, but potential bidders have until the end of the week to submit an initial letter of intent — a document outlining the terms and conditions of their participation — according to a person familiar with the matter, The Wall Street Journal reported. For example, the blockchain technology company Figure has expressed interest in helping to support the restart of FTX. This company participated in the Celsius Network bid, but ended in failure; the venture capital Tribe Capital also recently stated that it is considering injecting new funds to restart FTX.

Not only that, but the rebooted FTX will not be renamed as "FTX 2.0" or any other derivative of its original name, instead opting to rebrand it as an entity with a different name. Court documents show that FTX has hired the US law firm Ladas & Parry to provide intellectual property liquidation, filing and copyright/patent services. In addition, according to previous Reuters reports, FTX may restart in 2024.

In the eyes of John Ray and the restructuring team, the FTX restart seems to be the best way to ensure better results for creditor repayment than other methods. “We expect clients to receive recovery and/or equity tokens in FTX 2.0.”

Still owes $8.7 billion to clients, FTX liquidation team questioned as incompetent

According to the second interim report released by the FTX bankruptcy reorganization team in June this year, the current deficit is about 8.7 billion U.S. dollars, and current assets of about 700 million U.S. dollars have been recovered, but it is still far from the debt of 12 billion U.S. dollars. The third report will Released in August. In order to recover more assets, the FTX liquidation team has sued former executives such as SBF not long ago, seeking to recover the US$1 billion it misappropriated.

However, as FTX’s bankruptcy and reorganization is advancing, the accumulated legal costs are consuming users’ funds. According to the court documents released at the end of June, FTX’s liquidation costs have exceeded 200 million US dollars so far, of which only from February 1, 2023 to More than $120 million was spent in legal and other expenses during April 30, and these expenses were better than users paid before the introduction of Chapter 11 bankruptcy.

In this regard, many creditors have questioned that the FTX restructuring team has not made substantial progress. Not only has it disclosed that its assets have shrunk from the US$7.3 billion a few months ago, it has repeatedly repeated known content in the report, and there is a huge difference in lawyer expenses. Rationality, for example, Sullivan & Cromwell used too many novice lawyers to handle cases on FTX, and judging from historical cases, the proportion of lawyer fees in FTX cases to recovered assets is close to 3%, which has surpassed that of Enron, WorldCom and other well-known bankruptcy case.

Katherine Stadler, the bankruptcy lawyer appointed by the U.S. court to be responsible for inspection fees, also called for some lawyers' fees to be cut in June this year, and asked lead lawyer Sullivan & Cromwell to reduce its $42 million bill by about $650,000 to make up for overstaffing and overscheduled meetings. Bugs such as excess and ambiguous paperwork.

The FTX 2.0 Creditor Alliance also commented today that the Unsecured Creditor Official Committee (UCC) should choose to operate the FTX 2.0 team, while demanding the restart and restoration of tokens, and charging interest on its $2.6 billion cash holdings. Judging by the decision of John Ray and his team not to put this money into T-bills, they are incompetent operators and it may be necessary to oppose their upcoming motion to extend the exclusivity so that creditors can submit their own plans.

"As bankruptcy goes by day by day, customer assets are also deteriorating (decreasing)." As Delaware Bankruptcy Court Judge John Dorsey said, for creditors, the cost of litigation and reorganization is high, and restarting FTX may Whether it really improves their own situation is still unknown.