The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FTX’s Bahamas liquidators have received more than $1bn in claims from over 44,000 creditors as they urged a US judge to accept the crypto exchange’s Chapter 11 reorganisation plan.

Brian Simms KC, the Lennox Paton senior partner, and the PricewaterhouseCoopers (PwC) accounting duo of Kevin Cambridge and Peter Greaves, in a September 30, 2024, legal filing with the Delaware Bankruptcy Court warned that failure to approve the plan would endanger the deal that resolved a year-long battle with their US counterpart.

Giving their backing to the plan submitted by John Ray, head of the 134 FTX entities currently in Chapter 11 bankruptcy protection before the federal Delaware Bankruptcy Court, the Bahamian liquidation trio said any outcome that threatens to unwind the two parties’ settlement will undermine their joint efforts to maximise recovery for all victims of Sam Bankman-Fried’s fraud.

“The FTX Digital Markets global settlement agreement was a breakthrough in the Chapter 11 cases and the Bahamas official liquidation,” the FTX Digital Markets liquidators asserted. “It requires a distribution process in which named customers of the FTX.com exchange may elect which proceeding will govern the resolution and payment of their claims.

“The deadline to make the Bahamas opt-in election has now elapsed, and more than 44,000 customers holding more than $1bn of asserted claims in the aggregate have filed claims in the Bahamas official liquidation - in large part by using the opt-in mechanisms in the voting procedures and the plan.

“The 44,000 creditors provided an irrevocable release of their claims against the debtors [Mr Ray’s FTX entities in the Chapter 11 process] and may now only recover on those claims against FTX Digital Markets” in The Bahamian claims process.

Mr Simms, in an August 15, 2024, affidavit filed with the Supreme Court, revealed that the failed crypto exchange’s creditors and customers will enjoy “a remarkably favourable outcome” via a multi-billion interest gain while recovering all their principal if the claims process went according to plan.

He explained that the 9 percent interest rate applied following FTX’s November 2022 collapse could result in a $2bn collective gain for victims through to October 31 this year. That is when the revised Chapter 11 reorganisation plan developed by Mr Ray is due to take effect and trigger the payment of legitimate claims submitted by FTX creditors and customers both in The Bahamas and in Delaware.

And Mr Simms also disclosed that victims could enjoy a further collective $800m gain from interest continuing to be paid at 9 percent from end-October until their claims are paid in full. That would make for a total $2.8bn gain, in addition to the anticipated $11.2bn in claims accepted by both Mr Ray and the Bahamian liquidators.

However, all this depends on Mr Ray’s third Chapter 11 reorganisation plan defeating any objections to be approved on time by the Delaware courts. And the Bahamian liquidators, in their September 30 filings, warned that failing to achieve this milestone would have serious consequences for the deal worked out with Mr Ray.

“The debtors and FTX Digital Markets also agreed in the FTX Digital Markets global settlement agreement to co-ordinate the establishment of reserves, and the timing and amount of distributions to ensure that named customers of the FTX.com exchange in both proceedings receive substantially identical relative treatment,” they explained.

“The FTX Digital Markets global settlement agreement also provides funding for certain non-customer claims. The parties further made mutual undertakings to support the respective parties’ insolvency proceedings, and arrangements to enhance and optimise global recovery efforts and to monetise illiquid assets.”

However, the trio, who are overseeing FTX Digital Markets’ winding-up before the Bahamian Supreme Court then warned: “The FTX Digital Markets global settlement agreement will be fully implemented as of the effective date of the [Chapter 11] plan. If the plan is not confirmed or the effective date fails to occur, the FTX Digital Markets global settlement agreement will terminate.

“Termination would jeopardise the heavily negotiated procedures established under the agreement, as well as the settlement of the many issues that were the subject of litigation between the debtors and the joint official liquidators.

“The plan is the culmination of extensive, hard-fought negotiations between the debtors, joint official liquidators and other stakeholders that resolves novel and complex issues, and will maximise value for all customers and creditors of the FTX group.”

FTX’s Bahamian liquidators, in earlier advice distributed to creditors, estimated that so-called ‘convenience class’ customers - those claiming smaller sums and desiring to be paid out more quickly - would recover sums equal to 119 percent of the value of their approved claim. In the case of larger victims, who wait longer to receive their payout, this was forecast to rise to between 129 percent to 143 percent.

“These customers will receive a one-time, full and final distribution equivalent to 100 percent of their reconciled claim value based on the conversion rates as at 11 November, 2022, approved by the Bahamas Court, and an amount representing post-petition interest of 9 percent per annum on the reconciled claim value from the reference date of 11 November, 2022, through the applicable distribution date,” the Bahamian liquidators said of ‘convenience’ claims.

“The joint official liquidators currently estimate that this will amount to a payment of approximately 119 percent of the reconciled claim value for convenience class customers.”

As for those owed more than $50,000, they added: “At present, the joint official liquidators currently estimate that this will amount to a payment of approximately 129-143 percent of the reconciled claim value for non-convenience class customers of FTX. com.

“Distributions will be made via selected payment processors or crypto currency exchanges and service providers. We expect to offer retail customers a choice between short listed distribution agents. NFTs (non-fungible tokens will be returned to customers (where available) via a transfer to a selected wallet address.”