Delaware Judge Approves FTX Bankruptcy Plan

According to reports, on Monday, a U.S. court approved FTX's bankruptcy plan, which will allow most customers of the crypto exchange to recover the value of their 2022 losses, with some even receiving more than anticipated.

Delaware Judge Approves FTX Bankruptcy Plan, Most Creditors to Get Paid Back

A U.S. court on Monday approved FTX's bankruptcy plan, which will allow most customers of the crypto exchange to recover the value of their 2022 losses, with some even receiving more than anticipated. This approval marks a major milestone in the exchange's bankruptcy proceedings.

According to the court documents, Judge John T. Dorsey gave his final approval to FTX's second revised bankruptcy plan, which was filed in September and received overwhelming support—96% of creditors by number and 98% by the value of their claims. As per the plan, customers will receive cash payments roughly equivalent to an average of 118% of their holdings' value at the time of FTX's bankruptcy filing in November 2022.

The estate's legal team noted that some creditors could see up to 140% returns. While these payouts exceed what many might have expected two years ago, they fall short of the value growth experienced by Bitcoin (BTC) and other cryptocurrencies during FTX's bankruptcy proceedings.

During a nearly six-hour session, Judge Dorsey reviewed remaining objections to the plan. These included concerns from Celsius and Layer Zero, as well as individual creditors, some self-represented. Their issues revolved around the estate's decision to repay creditors in cash rather than cryptocurrency, the valuation of FTT tokens at zero, and debates over property rights outlined in FTX's terms of service. However, the judge dismissed all of these objections.

notably, despite the extensive discussion about the lack of value in FTT tokens during the hearing, the token's price surged by 55% following the court's approval of FTX's bankruptcy plan.

FTT Tokens’ Valuation, Property Rights Objections Dismissed

Brian Glueckstein, a partner at Sullivan & Cromwell representing the FTX estate, argued on Monday that the FTT tokens held by creditors were rightfully valued at zero, stating there was no justification for changing this valuation.

"Experts have demonstrated that FTT lacks any intrinsic value and holds no function outside of a running FTX.com exchange," he said, highlighting that the exchange will not be revived.

Challenges raised regarding "property rights"—which included claims that creditors should receive their crypto assets instead of cash and that they were entitled to other assets of the estate—were dismissed.

Testimonies, including those from Edgar Mosley, managing director at Alvarez and Marsal, pointed out that it was impossible to return cryptocurrency in-kind since the estate no longer had those assets.

FTX’s ability to repay creditors has been made possible through the liquidation of certain investments, including the sale of an 8% stake in AI startup Anthropic for $884 million, rising crypto prices since the exchange's downfall, and the estate's successful efforts to reclaim assets.

When John J. Ray III took over as CEO from Sam Bankman-Fried, FTX was nearly depleted of funds. For instance, there were only 105 Bitcoin left on the exchange—valued at approximately $17,000—while customers had deposited close to 100,000 Bitcoin.

Lawyers argued that it would be unfeasible to purchase the necessary amount of cryptocurrency to repay creditors at current market prices, a point with which Judge Dorsey agreed.

While returning crypto assets in-kind is not viable, the FTX legal team mentioned that they are exploring the possibility of distributing stablecoins to creditors.

The estate is reportedly in discussions with at least four companies about handling such a distribution if needed. However, the U.S. Securities and Exchange Commission has raised concerns regarding this aspect of the repayment plan.

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