As an experienced analyst in the crypto industry, I’ve witnessed several bankruptcy cases, including FTX’s, unfold over the years. While FTX’s decision to extend the deadline for submitting proof of debt is a step towards transparency and fairness, it also raises some concerns that need to be addressed.
FTX, the insolvent cryptocurrency platform, previously pledged to repay its debts and customer funds in cash within two months following judicial consent. This commitment has garnered approval from certain crypto enthusiasts. However, others are expressing apprehension due to their doubts about the logistics of the refund process.
Extended Deadline for Proof of Debt Submissions
To give creditors ample time to file their claims, FTX Digital Markets has announced the extension of the deadline for submitting proof of debt. Originally set for May 15, 2024, as mentioned by Sunil in a recent X post, the new deadline will see an extension of approximately 10 to 12 weeks. This extension allows customers to participate in the Bahamas proceedings. The exact date of this new deadline has not been determined yet but will coincide with the creditors’ voting schedule in the US process, enabling them to approve a Chapter 11 reorganization plan.
FTX claims
Bahamas Bar date extended 10-12weeks:
End of July/August
— Sunil (FTX Creditor Champion) (@sunil_trades) May 15, 2024
As an analyst, I’d explain it this way: The ongoing bankruptcy proceedings for FTX are split into two distinct processes – one in the Bahamas and another in the US. These separate legal procedures aim to resolve the financial obligations of the failed crypto exchange. By next month, customers will receive instructions on how to join either process. They will then have a timeframe of 6 to 8 weeks from the disclosure date to make their decision. While there might be slight variations between the two methods, customers can rest assured that distributions will be equal and simultaneous.
Addressing Complexities: Lessons from the Cryptopia Case
As a researcher, I’ve come across recent updates from FTX Estate regarding their expected cash reserves for customer distribution following the approval of a reorganization plan in Delaware Bankruptcy Court. The estimate ranges between $14.5 and $16.3 billion. However, customers are growing increasingly impatient due to the delay in refunds and the intricacies persisting around the FTX bankruptcy process.
Thomas Braziel, a well-known crypto analyst with a following of over 16k, voiced concerns on his X page regarding FTX payments. He pointed out that based on the terms of service, the customer balances did not align with the assets listed in the debtor’s petition during the time of the FTX bankruptcy filing. This discrepancy could potentially result in insufficient funds to cover all payouts. To address this intricacy, Thomas referred to the Cryptopia case under New Zealand and UK law, where different types of assets were handled as distinct entities. He proposed:
As an analyst, I would explain it this way: For each silo, it’s essential to fill it up first before any surplus can be distributed to other silos. When a silo experiences a deficiency, it results in what we call an “excess loss claim.” These claims are then valued in dollars and shared proportionately amongst all the un-siloed and excess property from the specific silo that contributed to the deficiency.
Interested parties, including creditors and customers of the failed exchange, are eagerly awaiting the release of the disclosure document. Nevertheless, the entire procedure is expected to take some time before it comes to fruition.
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2024-05-15 15:48