As per a recent The Block report, U.S. judge has approved FTX’s bankruptcy plan, effectively concluding a two-year legal saga that began after the cryptocurrency exchange collapsed under allegations of fraud and misconduct. In a hearing held recently, Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware sanctioned the plan, which enables 98% of creditors to receive at least 118% of their claims in cash.

The plan received substantial support, with nearly 94% of creditors in the “dotcom customer entitlement claims” class voting in favor of the reorganization, representing approximately $6.83 billion in claims. However, the approval did not come without controversy. Sunil Kavuri, a representative of the largest creditor group, criticized the decision to provide cash instead of in-kind distributions of cryptocurrency. He contended that the estate should honor the original assets held by customers at the time of bankruptcy.

Judge Dorsey emphasized the complexity of the case, calling it a “model case for handling a complex Chapter 11 bankruptcy.” He also noted that the value of FTT, the exchange’s native token, is effectively zero, stating, “I have no evidence today that the value of FTT tokens would be anything other than zero.” He elaborated that the tokens were closely tied to FTX’s operations, and without plans to revive the exchange, there is no basis for any potential increase in value.

The idea of launching an “FTX 2.0” was considered but ultimately ruled out. In June 2022, FTX CEO John J. Ray III mentioned that the company was exploring options for restarting the FTX.com exchange. However, in a January court hearing, FTX lawyer Andrew Dietderich informed the judge that no investors were prepared to commit the capital necessary for such a reboot.

FTX filed for bankruptcy in late 2022, and its former CEO, Sam Bankman-Fried, was found guilty of multiple criminal charges, including wire fraud and conspiracy, leading to a nearly 25-year prison sentence. The sister trading firm, Alameda Research, also faced a similar downfall, with its CEO Caroline Ellison sentenced to two years for her role in the scandal. Former FTX executives Gary Wang and Nishad Singh have also faced charges, with Singh’s sentencing set for later this month and Wang’s scheduled for late November.

Resources:

The Block