FTX Creditors Outraged as Revised Bankruptcy Proposal Sparks Conflict of Interest Worries
FTX Bankruptcy Case: Controversy Arises Over Exculpatory Clause in Revised Plan
The FTX bankruptcy case has taken an unexpected turn, causing quite a commotion in the cryptocurrency community. On May 7, FTX unveiled an amended plan that promised substantial changes to the repayment of creditors. However, it is the inclusion of an exculpatory clause in this plan that has ignited controversy.
Let’s delve into the details of FTX’s revised proposal.
The updated plan, presented on May 7, outlines a new approach to repaying creditors. Notably, it guarantees significant compensation, ensuring that more than 98% of creditors will receive an 11% payout.
However, the focus of contention centers around the exculpatory clause embedded within the plan.
S&C, the law firm overseeing FTX’s bankruptcy proceedings, has included this clause to shield themselves from liability for any misconduct. Concerns have been raised by the FTX Customer Ad-Hoc Committee, which represents over 1,500 creditors. Committee member Sunil has voiced apprehensions about potential wrongdoing, pointing to instances of assets being sold at reduced prices and the failure to relaunch FTX 2.0.
In addition, Sullivan & Cromwell, a long-standing law firm, has been accused of benefiting from FTX’s alleged multibillion-dollar fraud. Interestingly, FTX owes the S&C law firm up to $1.45 billion in legal bankruptcy fees, according to compensation filings from December 2023. These allegations have cast doubt on Sullivan & Cromwell’s neutrality, given its historical ties to FTX and involvement in crucial transactions.
The revised proposal has faced criticism not only from FTX’s creditors but also from industry experts. Rob, a pseudonymous FTX creditor and head of growth at Paradex, has joined the chorus of voices denouncing the lack of accountability and fairness in the plan.
With the fate of FTX’s amended plan hanging in the balance, all eyes are now on the upcoming creditor vote. The decision to accept or reject the proposal will significantly impact the course of the bankruptcy proceedings.
Stay tuned for updates on FTX’s uncertain future. What are your thoughts on the proposed plan? Share your opinions.