Crypto exchange surprises by prioritizing shareholders over creditors, causing backlash and market reactions.
FTX, the collapsed crypto exchange, has made a surprising decision in its bankruptcy proceedings. The company plans to set aside up to $230 million for certain shareholders, rather than creditors, from government forfeiture proceeds. This last-minute change has caught many creditors off guard, as they had already voted on the reorganization plan in August.
The decision to allocate funds to shareholders has sparked controversy. Typically, in bankruptcy cases, creditors are prioritized over shareholders. However, FTX's plan deviates from this norm by creating a preferred shareholders remission fund. This fund aims to repay shareholders with assets recovered by the Department of Justice (DOJ).
Creditors have expressed dissatisfaction with the revised plan. They are set to recover only 10-25% of their lost assets, based on the value of their crypto holdings at the time of the bankruptcy filing in November 2022. Many feel that this undervalues their investments, especially given the current market conditions.
Despite the controversy, the FTX token (FTT) has experienced a surge in value. This unexpected increase suggests that some investors remain optimistic about the exchange's future, even amid the ongoing legal and financial challenges.
The next hearing regarding the bankruptcy plan is scheduled for October 7. This will provide an opportunity for further discussions and potential adjustments to the plan. Creditors and shareholders alike will be watching closely to see how the situation unfolds.
