Cash or crypto? To vote on how FTX creditors will be returned

FTX has obtained court approval to ask creditors whether they would prefer to receive their proceeds in cash – FTX's current liquidity plan – or in crypto at the current market value.

US Bankruptcy Judge John Dorsey approved the FTX voting plan on June 25.

Several of FTX's creditors expressed dissatisfaction with the company's latest liquidity plan, which was presented in May. The plan proposes a return of 118% to 98% of creditors, based on the US dollar value of assets at the time of FTX's bankruptcy filing in November 2022.

However, many FTX lenders require payment in crypto in-kind, causing the crypto market to increase by 165% after the exchange's collapse.

To put some creditors' reluctance to pay in cash into perspective, Bitcoin (BTC) was trading around $16,900 when FTX filed for bankruptcy, but has risen 265% to $61,770 since press time.

The purpose of the poll is to receive feedback from FTX customers who have not yet engaged in payment negotiations, FTX attorney Andy Dietrich said at the court hearing.

However, FTX's attorneys have argued that bankruptcy laws require the company to value claims in accordance with FTX's Chapter 11 plan.

Lawyers added that the current cash payment plan would be easier to implement as lenders would not be subject to capital gains tax.

In particular, even if creditors support payment in kind crypto, this does not mean that the court is forced to accept it.

Creditors will have until Aug. 16 to vote on the plan, and Dorsey will decide whether to approve it on Oct. 7, according to court documents.

FTX has had $11.4 billion in cash since filing for bankruptcy, but Dietrich expects that figure to grow to $12.6 billion by Oct. 31 when FTX's Chapter 11 plan takes effect.

Related: CoinShares Confirms 116% Return From FTX Claim Sale

FTX in 2010 It was considered one of the world's largest cryptocurrency exchanges before its collapse in November 2022.

Nearly $8 billion has been misappropriated from millions of customers. Many of these funds were misappropriated by FTX's business, Alameda Research, causing cash flow problems as clients sought to acquire their assets.

The defunct exchange was handed over to FTX's current CEO, John Ray, a specialist active in bankruptcy matters.

Meanwhile, the firm's former CEO, Sam Bankman-Fried, pleaded guilty in November 2023 to multiple counts of fraud and money laundering and was sentenced to 25 years in prison in March.

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