FTX Creditors Reject Bankruptcy Plan Amid Allegations and Legal Disputes
Summary:
An array of FTX's creditors, led by Sunil Kavuri, have objected to the company's bankruptcy reorganization plan citing it does not serve their best interests, and could lead to unnecessary taxable events. Critics also contest the release of funds to debtors and allege them to be illicitly acquired. This fallout intensifies the ongoing friction between the bankrupt FTX, its past customers, and creditors, with disagreements over reparations and legal proceedings. Tensions further escalated as creditors filed a lawsuit against law firm Sullivan & Cromwell, accusing them of complicity in FTX's fraudulent activities, a claim later dismissed by an independent inquiry.
An objection has been lodged against the bankruptcy reorganization plan of crypto firm FTX by a set of its creditors, including the primary dissenter, Sunil Kavuri. The dissenters declined the proposal for a number of reasons, prime among which was the belief that it didn't serve the creditors' paramount interests. The creditors expressed concerns that accepting repayments via actual money would result in a taxable incident, inevitably leading to unwarranted expenses. A possible resolution was suggested in their objection, in the form of an in-kind asset repayment.
Additionally, the creditors disputed the allocation of funds to the debtors, in this case the bankrupt FTX organization, referring to the regulations in Chapter 11. They insinuated that the funds the FTX is trying to distribute essentially stem from illicit activities.
Following the image is the news about FTX clearing a $200M tax bill with the IRS.
This opposition is just one of the outcomes of ongoing tensions between the bankrupt FTX, its past client base, and its creditors. In 2023, the Official Committee of Unsecured Creditors (UCC) associated with FTX expressed significant dissatisfaction with FTX's plan for financial reorganization, citing their absence from initial draft discussions as part of the reason.
The UCC further noted that the terms specified in the plan would only further complicate the complex bankruptcy process, leading to more delay and financial burdens in the settlement procedures.
Besides, in January 2024, past clients and creditors of FTX united in their demand that the defunct exchange should refund them on present market rates instead of quoting rates from 2022 when the exchange crumbled amidst a low period in the crypto market.
This point of disagreement has turned into a major issue in the ongoing liquidation discussions, with the FTX organization and its creditors at odds over an in-kind proposal and the all-encompassing matter of property claims.
The conflict between the creditors and FTX's bankruptcy organization reignited in February 2024 when the creditors filed a lawsuit against Sullivan & Cromwell, the law firm entrusted with handling FTX's bankruptcy. They claimed that the firm had a part to play in the workings of FTX Fraud and had prior knowledge of the impending downfall of the exchange.
However, a later independent investigation pronounced Sullivan & Cromwell innocent and stated these accusations were baseless, as they had no prior information about any fraudulent activities involving FTX before the latter's financial failure. Magazine: NFT Creator highlights a digital artist OSF vowing 'art until I die' to his fans.
Published At
6/7/2024 1:06:34 AM
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