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Creditors Claim FTX Was Silent For Exchange Reboot Plans

Creditors Claim FTX Was Silent For Exchange Reboot Plans

FTX’s creditors claim they were not informed about a proposed revival plan for the international exchange, leading to skepticism about its viability and allegations of broken promises.

Highlighting Points

  • FTX‘s creditors allege not being informed about a proposed plan to revive the company’s international exchange, claiming it’s merely an “idea” without formal discussions.
  • FTX’s lawyers are accused of breaking promises, reneging on public roadmap provision, and disregarding creditors’ restructuring suggestions.
  • FTX’s plan categorized creditors into classes, but faced criticism for lacking provisions on management, recovery tokens, and compensation for fraud victims.
  • The plan’s release led to a 10% increase in FTT price, but industry players remain skeptical about its viability and suggest rebranding may be necessary.

 

The lawyers representing FTX’s creditors have alleged that they were not informed about a proposed plan to revive the company’s international exchange. According to a filing made on Monday night, the creditors claim that the restructuring plan is merely an “idea” and that no formal discussions have taken place to implement it.

Broken Promises

In their statement, the claimants accused FTX’s lawyers of reneging on their promise to provide a public roadmap for the bankruptcy proceedings and to collaborate with the creditors on a successful reorganization plan. Instead, the debtors disregarded the suggestions made by the creditors for restructuring, which were not formally negotiated. Despite the plan being released within the established deadline, the creditors argue that it only gives the appearance of progress without any substantial actions being taken.

“Unfortunately, what was supposed to be a watershed moment for these bankruptcy cases—the filing of a plan of reorganization preceded by robust, good faith negotiation and collaboration—is anything but,” read the filing.

FTX’s plan, which was presented earlier on the same day, aimed to categorize the exchange’s creditors into distinct classes based on their association with FTX US or the larger international exchange. Each class would receive a proportionate share of the asset pool of the respective exchange. FTX CEO John Ray III and former boss Sam Bankman-Fried have claimed that the funds of FTX US were separate from FTX and Alameda, with the former asserting that the US branch is solvent.

The release of the plan led to a 10% increase in the price of FTT, which had fallen when FTX filed for bankruptcy in November. However, according to the creditors, the plan is not a comprehensive solution but merely a collection of ideas put forth by the debtors.

Specific Concerns About the Plan

The plan has faced criticism for its failure to address certain crucial aspects. The creditors are dissatisfied with the absence of provisions regarding the selection of qualified individuals to manage FTX after the restructuring. They also want a say in the development of a regulatory-compliant recovery token and proper compensation for those most affected by the fraud that occurred.

Furthermore, the creditors expressed their dismay at the substantial legal fees incurred by the debtors throughout the bankruptcy process. Despite initially being advised to be frugal, the debtors have amassed significant expenses. As a result, these bankruptcy cases are likely to become some of the most costly in history, with an average expenditure of $50 million per month on professional fees since the exchange’s collapse.

“The Committee is extremely disappointed that the Debtors have not engaged with the Committee on these issues nor yet discussed them with its members to appreciate their import,” the creditors added.

Many industry players have voiced skepticism about the viability of FTX’s plan to revitalize the exchange. Some, like investor Anthony Scaramucci, have suggested that a complete rebranding may be necessary.

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