FTX Faces Backlash Over Revised Plan Including Exculpatory Clause and Repayment Modifications
Controversy Surrounds FTX’s Amended Proposal in Bankruptcy Proceedings
FTX, a prominent cryptocurrency exchange, has sparked controversy with its recent update to the bankruptcy proceedings. The amended proposal, released on May 7, includes an exculpatory clause that has raised concerns and criticism within the cryptocurrency community.
The amended plan introduces significant changes to the repayment strategy for creditors. It promises substantial compensation and an 11% payout to over 98% of creditors. However, the focal point of contention revolves around the exculpatory clause embedded within the plan.
The exculpatory clause has drawn criticism from creditors, particularly the FTX Customer Ad-Hoc Committee representing over 1,500 creditors. Committee member Sunil expressed concerns about potential misconduct by Sullivan & Cromwell (S&C), the law firm overseeing FTX’s bankruptcy proceedings. Sunil cited asset sales at significant discounts and failures to restart FTX 2.0 as examples of potential misconduct.
Sullivan & Cromwell, a century-old law firm, has also faced accusations of benefiting from FTX’s alleged multibillion-dollar fraud. However, it was discovered that FTX owed up to $1.45 billion in legal bankruptcy fees to S&C based on compensation filings from December 2023.
The creditors have raised concerns about S&C’s role and the potential conflict of interest due to its historical ties to FTX and involvement in key transactions.
FTX creditors and industry experts have expressed skepticism and dissatisfaction with the amended proposal. Pseudonymous FTX creditor Rob, who is also the head of growth at Paradex, strongly opposed the proposal, citing concerns over accountability and fairness.
The sentiment among creditors reflects broader apprehension regarding the proposed compensation structure and the exculpatory clause.
The fate of FTX’s amended plan now hinges on the upcoming creditor vote. The decision to accept or reject the proposal will significantly impact the trajectory of the bankruptcy proceedings.