FTX’s creditors oppose the bankruptcy reorganization plan

A group of FTX creditors led by Sunil Kavri has filed objections to FTX's bankruptcy reorganization plan. They refuse for a variety of reasons, including stating that it is not in the best interest of creditors.

Lenders argued that the cash refunds would create a taxable event, so that the lenders would incur an undue expense. Compensation for assets in kind was listed as a remedy in the protest.

Moreover, the creditors objected to the release of the money to the debtors – the property of FTX – citing the Chapter 11 law, in the end, the bankruptcy estate of FTX is trying to distribute the stolen property.

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These protests follow months of wrangling between FTX's bankruptcy estate, former customers and FTX's creditors. In the year In 2023, the Official Committee of FTX's Unsecured Creditors (UCC) said it was “deeply disappointed” by FTX's bankruptcy estate reorganization plan, saying it was not consulted for input during the initial draft process.

The UCCC also said the provisions in the plan would complicate the already complicated bankruptcy process, adding time and cost to the settlement process.

In the year In January 2024, former customers and creditors of FTX demanded that the now-defunct exchange be paid using the current market value of the 2022 FTX exchange, as opposed to the lower price it was when it fell into the depths of the crypto bear market.

The dispute has become a major point of contention in the bankruptcy proceedings, as FTX's estate and creditors continue to wrangle over the proposal in kind and the broader ownership of the property.

Tensions between FTX's creditors and the bankruptcy estate flared again in February 2024 when FTX's creditors filed a lawsuit against Sullivan & Cromwell, the law firm overseeing FTX's bankruptcy. They alleged that the company was complicit in the FTX scam and knew about the dire situation of the previous exchange before it collapsed.

An independent investigation later found Sullivan and Cromwell innocent of any wrongdoing and that the law firm was unaware of any fraudulent activity prior to its collapse in FTX.

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