Recently, the restructuring plan of FTX has entered the voting stage. This article summarizes key information that creditors are concerned about, such as the compensation key points, claimants, and compensation plans.

Author: Nancy, PANews

The imminent compensation of the $16 billion funds by FTX is considered to be an important buying force to boost the cryptocurrency market. Recently, the FTX restructuring plan has entered the voting stage. This article from PANews summarizes key information that creditors are concerned about, such as the compensation key points, claimants, and compensation plans.

The voting window will close on August 17th, and claimants can choose to file claims in the Bahamas or the United States.

Recently, the Unsecured Creditors Committee (UCC) of FTX posted on the X platform, stating that FTX debtors are soliciting opinions and votes from clients and creditors through Kroll Corporation to vote on the client claims plan. The deadline for this voting plan is 05:00 on August 17th, Beijing time, and the voting results will be announced 7 days before the scheduled hearing, which is set for 23:00 on October 7th, Beijing time.

These creditors are mainly divided into three types: "with voting rights," "deemed to accept the plan without voting rights," and "deemed to reject the plan without voting rights." Specifically, users holding fiat or cryptocurrencies other than FTT will have the right to vote, while those holding only FTT/NFT will be deemed to reject the plan and have no voting rights. They are also classified based on the compensation entity, amount, and type, with the majority falling into Class 5A, Class 7A, and Class 13-18 categories.

Among them, Class 5A represents FTX.com clients with claim values exceeding $50,000; Class 7A represents FTX.com clients with claim values below $50,000; and Class 13-18 cannot make any claims and have no voting rights, including equity interests, FTT, and small claims holders.

Both Class 5A and Class 7A FTX.com clients can choose to file claims through the FTX DM in the Bahamas liquidation process or through the United States, but users can only receive compensation from one of the processes, and the decision is irreversible and cannot be changed. Regardless of which process the creditor chooses to file a claim, they will receive roughly the same return at the same time, provided that the plan is valid and meets all client KYC, AML, and tax reporting requirements.

However, the two compensation processes have their own advantages. For example, FTT/small claims holders not supported in the United States can file claims in the Bahamian process, while the John Ray-led liquidation restructuring case in the United States controls most of FTX's assets, increasing the likelihood of compensation.

In addition, in terms of taxation, non-U.S. creditors will not be affected by the 30% withholding tax in the United States. According to the disclosure, a special committee representing non-U.S. clients composed of international creditors has members from over 31 countries, with over 60 members. As of June 28, 2024, the committee collectively holds approximately $4.5 billion in Dotcom client (clients using the FTX.com exchange) equity claims.

Class 7A creditors can receive one-time compensation, preferably in stablecoin payments.

If the bankruptcy protection plan is approved, all FTX.com clients are expected to receive full payment, with an estimated claim of 119 to 143 cents per dollar, and interest on unpaid claims calculated at a consensus interest rate of 9% from the application date to the applicable distribution date. According to the user guide for claimants released by PricewaterhouseCoopers, the first mid-term dividend distribution is expected to be paid at the end of 2024 or early 2025.

Specifically, Class 7A claims are at 119%, and it is expected that 98% of these creditors will receive one-time compensation within 60 days; Class 5A claims are expected to be between 129% and 143%, but after full compensation and payment of interest, the remaining value will be obtained through the distribution of the supplementary relief fund, which is expected to be funded by recoveries that should have been paid to senior subordinated government creditors. From the rules, compared to Class 7A, the compensation for Class 5A will be in multiple stages, and the specific timing is not clear, but they can also expedite the claim by agreeing to reduce the claim amount to below $50,000.

The order of compensation is also crucial to the interests of creditors. Previously, the U.S. Internal Revenue Service (IRS) pushed $685 million out of the $885 million in claims to be paid after clients receive full payment due to opposition from creditors. Recently, FTX reached a settlement with the U.S. Commodity Futures Trading Commission (CFTC), with $4 billion in claims ranking behind creditors and interest, and the payment to the CFTC will be transferred to the supplementary relief fund to compensate cryptocurrency holders who have suffered severe losses (only if funds are sufficient).

In terms of the form of compensation, FTX creditors previously stated that cash payments would require clients to pay taxes on the received cash and expressed a preference for receiving distributions in stablecoins rather than cash. In response, the UCC stated that the committee will urge the debtors to provide stablecoin options to as many creditors as possible.

The UCC believes that although the restructuring plan is not perfect, it is the best solution to maximize the compensation amount for creditors. If opposition from creditors leads to the Chapter 11 restructuring being converted to Chapter 7 liquidation, it will face reduced recovery amounts, extended compensation time, and increased litigation costs. Therefore, the committee encourages creditors to vote in favor of the plan.

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