A U.S. judge has approved FTX’s bankruptcy reorganization plan, bringing the two-year proceedings to a close after the cryptocurrency exchange collapsed in late 2022 amid fraud allegations.
During a Monday hearing, Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware approved the plan, allowing for the distribution of funds to creditors.
Under the plan, 98% of creditors will receive at least 118% of their claim value in cash. About 94% of creditors in the “dotcom customer entitlement claims” class, representing around $6.83 billion in claims, voted in favor of the reorganization. Judge Dorsey praised the process, calling it a “model case” for complex Chapter 11 bankruptcies.
However, the plan faced criticism from Sunil Kavuri, a representative of FTX’s largest creditor group. Kavuri argued that creditors should receive their payout in cryptocurrency rather than cash, citing concerns over potential tax burdens associated with cash payouts.
Despite these objections, David Adler, a lawyer for some creditors, highlighted that FTX lacked the necessary cryptocurrency reserves to make in-kind distributions.
Judge Dorsey rejected the notion of in-kind distributions, reaffirming that the value of FTX’s native token, FTT, is zero. He explained that FTT tokens were closely tied to the exchange, and with FTX no longer in operation, there is no prospect of the token regaining value.
FTX’s native cryptocurrency saw a dramatic price increase last week, surging by over 70% to hit $2.70, its highest level since March 2024. As of September 30, there were around 30,600 FTT holders, with the token’s market cap sitting at roughly $330 million. FTT was excluded from FTX’s repayment plan in July 2024 due to its “equity-like characteristics,” further complicating its future amid the bankruptcy proceedings.
Plans for an FTX 2.0 reboot were discussed but ultimately abandoned, as no investors were willing to commit capital to restart the platform. FTX’s former CEO Sam Bankman-Fried was found guilty of fraud in November 2023 and sentenced to 25 years in prison.
Other executives, including Caroline Ellison, Gary Wang, and Nishad Singh, faced charges and cooperated with prosecutors, with Singh’s sentencing scheduled for later this month.
