FTX's Proposed Repayment Plan Ignites Controversy Among Creditors Over Liability Clause
Summary:
FTX's latest proposal to repay creditors, which includes an exculpatory clause, has sparked controversy. This clause potentially absolves parties of liability during the bankruptcy process - an aspect that has particularly upset creditors with regards to law firm Sullivan & Cromwell (S&C). The proposal has led to widespread dissent among creditors, especially since the proposed base for the compensation is a much lower Bitcoin price than its current value. BitGo CEO Mike Belshe said none of FTX's creditors agree with the proposed payout structure.
In their latest proposal to repay creditors, FTX included a provision that absolves certain parties from liability should any damage occur throughout the bankruptcy process. This clause, known as an exculpatory clause, hasn't been well-received by creditors, who are particularly unhappy with its potential application to law firm Sullivan & Cromwell (S&C). FTX creditor Sunil, a member of the largest group of over 1,500 FTX creditors, opines that this clause might have been inserted to mitigate liability for S&C themselves.
Sunil voiced his concerns on a recent post, questioning the inclusion of the exculpatory clause, suggesting that it could potentially allow S&C to eschew responsibility for misconduct such as selling FTX assets at deep discounts to their own clients without repercussions.
Earlier this year, S&C was sued by top FTX creditors who accused the firm of playing a role in the "FTX Group’s multibillion-dollar fraud". The creditors claim that S&C was well aware of FTX's fraudulent behaviors but stood to profit from the group's misdeeds. The law firm, which has been supervising the FTX bankruptcy proceedings, has reportedly served as outside counsel on numerous transactions for the exchange. As of December 2023, FTX owes up to $1.45 billion in legal bankruptcy fees to S&C according to compensation filings.
The inclusion of the exculpatory clause in FTX's proposal sparked an uproar among cryptocurrency investors. Many fear that this clause might lead creditors to reject the proposal, impacting the approval of the amended plan.
Despite FTX's pledge to provide an 11% payout to over 98% of creditors along with further compensation, the backlash continues. Several creditors have pointed out that the proposed compensation, based on a Bitcoin (BTC) price of $16,800, is grossly inadequate given Bitcoin's notable appreciation since FTX's financial collapse.
BitGo CEO Mike Belshe highlighted in a post that none of the FTX creditors agree with the proposed compensation structure, underscoring a significant dissatisfaction among the creditor community with FTX's handling of the bankruptcy proceedings.
Published At
5/8/2024 11:56:55 AM
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