On July 31st, under the leadership of its new CEO, John J. Ray III, the bankrupt FTX Trading Ltd., a cryptocurrency exchange, proposed a draft blueprint to “revive” the fallen crypto exchange.
The plan was unveiled on Monday, offering the creditors of FTX.com the choice to possess equity shares, tokens, or other interests in a newly formed offshore entity.
The documents filed contained a preliminary restructuring plan that outlined the company’s proposed strategy to deal with a broad and complex assortment of claims. To manage this, the claimants will be divided into specific groups.
Customers of the FTX.com offshore exchange will be known as “Dotcom customers,” while FTX US customers will be labeled as “US customers.”
The claims are divided into 13 unique categories: Other Priority Claims, Secured Claims, Separate Subsidiary Claims, General Unsecured Claims, Dotcom Convenience Claims, U.S. Convenience Claims, General Convenience Claims, Intercompany Claims, Intercompany Interests, Subordinated Claims, FTT Claims, Preferred Equity Interests, Section 510(b) Claims, Other Equity Interests, and Pool Claims that comprise Dotcom Customer Entitlement Claims, U.S. Customer Entitlement Claims, and NFT Customer Entitlement Claims.
The proposed blueprint outlines the establishment of three primary recovery pools: the Dotcom Customer Pool, the US Customer Pool, and the General Pool, which includes all assets linked with FTX.com and FTX US.
The Dotcom Customer Pool is composed of claimants from the FTX.com offshore exchange, while the US Customer Pool includes customers of the US exchange. General claims are those from Alameda’s lenders or trading partners, and subordinated claims involve taxes and fines from penalties.
The priority of these claims will be determined based on “waterfall priorities,” with each class receiving a proportional payout from the remaining pool once the preceding class has been settled.
The specific order of payouts will be established through negotiations with key stakeholders.
FTX Considers Reboot: Draft Plan Raises Questions on FTT Holders and Addresses Non-Customer Claims
A new enterprise, financed by third-party investors, is set to be launched to operate a revived offshore platform solely for Dotcom clients, except those based in the United States.
The document states that the Debtors could choose to provide the Dotcom Customer Pool with non-cash consideration instead of cash. This could take the form of equity securities, tokens, or other stakes in the Offshore Exchange Company, or the rights to invest in such interests.
After the deduction of expenses and the convenience class deduction for Dotcom customers, each Dotcom client will receive a portion of the revenue generated from FTX.com’s assets.
According to the proposed scheme, each person holding a dotcom customer entitlement will obtain a proportionate share of the revenue from a collection of assets tied to the FTX.com exchange. This is, however, after the deductions for the dotcom customer convenience class and other expenditures.
It’s important to highlight that the proposed restructuring does not consider the claims of FTT holders since the SEC classified it as a security in a complaint lodged in December against FTX co-founder Gary Wang and former Alameda Research CEO Caroline Ellison. Additionally, non-customer claims such as regulatory fines and taxes will be given lower priority.
The preliminary plan can be revised based on the input from Consulting Parties and other stakeholders. This presents a novel strategy for addressing the intricate problems associated with the failed cryptocurrency exchange.
