Judge John T. Dorsey of the U.S. Bankruptcy Court for the District of Delaware has approved the FTX estate’s bankruptcy plan. This means that creditors of the crypto exchange may finally heave a sigh of relief after what has been a prolonged series of back-and-forth court hearings.
The bankruptcy plan was originally filed in September after it underwent a second adjustment. It was immediately backed by creditors, with 96% of voting creditors by headcount and 98% of creditors by amount, all showing their maximum support for the plan.
As part of the bankruptcy plan, customers may receive cash repayments worth an average of 118% of the value of their holdings at the time FTX filed for bankruptcy in November of 2022. For others, this figure could rise as high as 140%.
Relief for FTX Creditors, But Bankruptcy Plan Remains Controversial
Through Monday’s six-hour hearing, Judge Dorsey overruled several objections to the bankruptcy plan. These include the objections from some particular set of creditors, including companies like Celsius and Layer Zero.
For Celsius and others like it, they raised concerns about the decision to repay them in cash instead of cryptocurrencies. They also were not impressed by the estate’s decision to value FTT tokens — FTX’s native token at zero.
Despite the valid points that were raised, Judge Dorsey ended up siding with the legal team of FTX. According to the judge, cash payments were in the best interest of creditors and upholding the estate’s stance on FTT tokens.
Meanwhile, Brian Glueckstein, a representative of the FTX estate and a partner at Sullivan & Cromwell, has explained why creditors will have to go with the court’s decision. Glueckstein noted that the FTT tokens held by creditors had no real value. Part of the statement reads:
“Experts explained that FTT has no fundamental value. There’s no utility outside of an operating FTX.com exchange.”
Glueckstein also confirms that there is currently none, and there will be no restarted FTX.com exchange.
FTT Token Gathers Momentum
Although the court’s decision came as a disappointment to most creditors, FTT’s market price has surged greatly since the ruling. The token originally spiked nearly 55% shortly after news broke about the ruling. As of publication, however, the token was seen trading at $2.77 and still up 14.78% in the past 24 hours. That is, according to CoinMarketCap data.
Creditors remain divided over the ruling. While some are content with the cash returns that already exceed their expectations, others decry the loss of potential gains that crypto has accumulated during the prolonged bankruptcy process.
It remains to be seen how the firm intends to distribute the funds. Although in-kind crypto distributions are out of the equation, the firm is currently weighing its options as regards stablecoin alternatives.
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