The Tribune

By NEIL HARTNELL 

Tribune Business Editor 

nhartnell@tribunemedia.net

FTX’s Bahamian liquidators are asserting 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.

Brian Simms KC, the Lennox Paton attorney and senior partner, alleged in an August 15, 2024, affidavit filed with the Supreme Court that the 9 percent

interest 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 John Ray, the Bahamian liquidators’ US counterpart, is due to take effect and trigger the payment of legitimate claims submitted by FTX creditors and customers both here and in Delaware.

And Mr Simms, whose fellow FTX Digital Markets’ liquidators are PricewaterhouseCoopers (PwC) accounting duo, Kevin Cambridge and Peter Greaves, 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. “The joint official liquidators believe that payment of post-petition interest on accrued eligible Digital Markets customer claims and Digital Mar- kets non-customer claims is a remarkably favourable outcome for creditors and customers,” Mr Simms asserted.

“Assuming that the effective date of the plan is October 31, 2024, and the total estimated amount of allowable creditor claims is approximately $11.2bn, the post-petition interest payment could provide approximately $2bn of incremental value to creditors through to the effective date of the plan.

“After the effective date, creditors would continue to earn 9 percent interest on the unpaid portion of their claims from the petition date until paid in full, resulting in approximately $0.8bn ($800m) of incremental value to creditors.”

The disclosures came as the Supreme Court granted approval to several amendments to the deal agreed with Mr Ray in a bid to facilitate the prompt return of assets to creditors. This includes a structure designed to compensate small creditors owed $50,000 or less via an “accelerated” payout that will be made within 60 days of the Chapter 11 plan taking effect.

“As a practical measure, in the best interest of the estates, the [Bahamian liquidators] and [Mr Ray] have assessed and determined a means to accelerate distributions to creditors and customers (especially to the holders of smaller claims),” Mr Simms alleged.

This “included by allowing creditors and customers with reconciled claim values of $50,000 or less to be classified in the plan as ‘convenience class claims’ and to receive payment with interest within 60 days of the effective date of the plan, subject to completion of any KYC (know your customer) and the necessary distribution requirements,” he added.

“Through this convenience class mechanism, approximately 98 percent of customers will be eligible to receive early cash recoveries. Customers with claims over the sum of $50,000 can also irrevocably agree to have their claim reduced to $50,000 in order to be paid with in the convenience class. However, these customers will be disentitled and barred from seeking the difference in value for accepting the lesser sum.”

FTX’s Bahamian liquidators, in earlier advice distributed to creditors, estimated that so-called ‘convenience class’ customers would recover sums equal to 119 percent of the value of their approved claim. n 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.”