In a significant resolution, the longstanding dispute between FTX and Bahamian liquidators has been resolved. On December 19, the now-defunct cryptocurrency exchange and its associated debtors disclosed an undisclosed settlement, currently pending approval from both the U.S. Bankruptcy Court for the District of Delaware and the Supreme Court of the Bahamas.
This marks a pivotal development in the ongoing bankruptcy proceedings initiated following the collapse of the exchange in November 2022. The settlement, outlined in a press release, involves FTX debtors consolidating assets with Digital Markets to efficiently disburse funds to users affected by the closure of the cryptocurrency exchange. Termed a “novel and mutually beneficial solution,” the settlement addresses intricate cross-border legal challenges arising from the demise of the trading platform.
According to the proposed settlement terms, FTX users without outstanding claims will receive compensation in U.S. dollars for their losses, either in cash or digital assets, excluding nonfungible tokens [NFTs]. Users eligible to file claims can partake in voting on the reimbursement plan during the second quarter of 2024.
An important caveat notes that FTT interests against the FTX Debtors and Digital Markets will be treated as equity and will not qualify for any recovery under this settlement.
FTX CEO: “Agreement Is A Critical Milestone”
John J. Ray III, the current CEO of the crypto exchange, underscored the significance of the Global Settlement Agreement, deeming it a crucial milestone for the FTX Debtors. He acknowledged the challenges posed by conflicting filings and the overlapping constituencies of customers.
The troubled exchange initiated Chapter 11 protection proceedings last year and recently presented a reorganization proposal designed to reimburse its customers and creditors, who have been awaiting a resolution for several months. Unveiled on December 18, the plan outlines FTX’s strategy for allocating its remaining assets and liabilities among stakeholders. According to the proposal, the exchange intends to liquidate the majority of its cryptocurrency holdings and utilize the proceeds to settle a portion of its outstanding debts.
Approval for the plan is pending, contingent on the consensus of creditors and the evaluation by US Bankruptcy Judge John Dorsey, who will scrutinize it for any potential errors or omissions. Creditors have until the next year to cast their votes on the plan, with anticipated adjustments likely to be incorporated before the final decision.