Following the resounding collapse of cryptocurrency exchange FTX in November 2022, the company's creditors will soon have to decide how the recovered funds will be repaid to them. FTX has obtained court permission to consult them on whether they would prefer to be repaid in cash or cryptocurrencies.
FTX's repayment plan
According to court documents, FTX's plan calls for 98% of its creditors to be reimbursed up to 118% of their claims, in cash. Other creditors, including government agencies, could recover up to 143% of what they are owed. FTX claims to have recovered between $14.5 and $16.3 billion from the liquidation of its assets scattered around the world.
Choosing the right creditors
This choice between repayment in cash or cryptocurrency is not trivial for FTX's creditors. On the one hand, a cash payment would enable them to quickly recover a substantial portion of their funds. On the other hand, a repayment in cryptocurrencies would mean them potentially missing out on the price rises seen since FTX's collapse. Some creditors have already voiced their dissatisfaction with this plan, which they consider too advantageous for FTX.
Next steps
Creditors will have until August 16 to vote on FTX's proposed repayment plan. Judge John Dorsey will then have to approve it at a hearing scheduled for October 7. This decision will be crucial in determining how the recovered funds will ultimately be distributed to the victims of FTX's collapse. The outcome of this vote could have a significant impact on future investor confidence in cryptocurrency platforms.
