Administrators of the collapsed cryptocurrency exchange FTX, which was founded by alleged fraudster Sam Bankman-Fried, have outlined a proposed repayment plan for the estimated US$8bn at stake in the high-profile bankruptcy proceeding.
One class of creditors that is unlikely to claw anything is the holders of FTX’s FTT token.
Interestingly, FTX’s administrators consider FTT tokens as an equity class, which could potentially classify them as unregistered securities, a claim long held by the US Securities and Exchange Commission.
Per the reorganisation draft: “No holder of a FTT claim shall receive any distributions on account of its FTT Claim… all FTT Claims shall be canceled, released and extinguished and shall be of no further force and effect, whether surrendered for cancelation or otherwise.”
Priority claims are top of the pile, assumably meaning the administrators themselves, followed by secured claims, which typically refer to debts or liabilities that are backed by specific collateral or assets of the company.
Secured creditors generally have a higher priority compared to unsecured creditors because they have a legal right to claim the specified collateral if the company fails to fulfill its debt obligations.
Separate subsidiary claims come next followed by what are classified as ‘dotcom customer entitlements’, the latter referring to customers of the FTX offshore-registered exchange.
US-based customers are next in the repayment waterfall, followed by NFT customers, dotcom convenience claims, general convenience claims and intercompany claims.
IRS and equity claimants to miss out
One surprising aspect of the plan is the fact that subordinated claims owed to the tax collectors have a lower priority than most, coming only above equity and FTT claimants.
Equity claimants, including FTT token holders, are unlikely to receive anything back once the above are repaid, especially considering the US$50mln-per-month professional services fees the bankruptcy bas been racking up.
John J. Ray III, chief executive and chief restructuring officer of the FTX Debtors, said: "We are pleased today to deliver on our commitment to file the Plan at this relatively early stage – before the expiration of the customer bar dates, the completion of our pending investigations and the preparation of a disclosure statement.
“This is expected to facilitate creditor feedback to further discuss open issues in the plan with stakeholders, including the unsecured creditors committee, the ad hoc committee of non-U.S. customers and other parties with whom we have been in discussion.
Our goal is to achieve a consensual plan and emergence from bankruptcy. We are committed to working through these matters in the third quarter of 2023 and to filing an amended plan and a disclosure statement in the fourth quarter of 2023."
The plan is subject to change pending feedback from stakeholders.