FTX creditors to receives 118 cents on dollar, call for crypto payouts

abdelaziz Fathi

The recent draft recovery plan released by the bankrupt crypto exchange FTX has spurred a big jump in the value of claims, with estimates suggesting most creditors could see a recovery rate of 118%.

FTX’s claims are now trading between 101% and 112% on the crypto bankruptcy site Xclaim, as stakeholders react with both surprise and strategic recalculations.

The surge in claim values has been noted since the release of the draft plan, with interest from claimants, including one with a claim valued at $125 million. Braziel believes that the substantial ownership of the docket by distressed asset investors and the high percentage of claims in stablecoins diminish the likelihood of successful opposition to the recovery plan.

Nevertheless, Sunil Kavuri, a representative of the largest FTX creditor group, advised against supporting the reorganization plan. Kavuri advocates for payouts in cryptocurrencies rather than their dollar value at the time of the exchange’s bankruptcy filing, highlighting a fundamental disagreement over the recovery process.

On the trading front, Louis Origny, CTO of claim buyer FTXCreditor, which has acquired over 2,100 claims, expects a further increase in claim buying. Origny highlighted two key reasons for this expectation: the disclosure statement’s mention of a 30% tax withholding for non-U.S. customers and the logistical challenges some claim holders may face in cashing USD checks.

Earlier in March, Attestor Capital, a London-based investment firm holding significant FTX bankruptcy claims, filed a legal action against a Panamanian company called Lemma Technologies.

The lawsuit stems from Lemma’s alleged retraction of an agreement to sell two FTX accounts, valued at $166 million at the time of FTX’s collapse, to Attestor. The agreement was formed in June 2023 after Attestor placed the highest bid in an auction organized by Lemma Technologies in May 2023.

Lemma Technologies, which acquired the accounts from its majority owner, South Korean national Junho Bang, in January 2023, agreed to sell the claims to Attestor for about $58 million. At the time, this sum represented nearly 35% of the accounts’ initial value.

However, Attestor alleges that Lemma began to voice concerns over its authority to sell the claims and the liability Bang could face from his business associates if the transfer proceeded.

As delays ensued, Lemma Technologies is accused of attempting to renegotiate the purchase price, indicative of what Attestor describes as “seller’s remorse.” The suit highlights the rising value of FTX claims, with the average bid for claims increasing from 35% at the time of the agreement to 92% by the end of 2023. This came amid growing investor confidence in recovering funds through the bankruptcy process.

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