FTX Reorganization Plan Hits Legal Roadblocks

FTX's restructuring plan is hitting legal roadblocks despite strong support from creditors.

Although over 95% of creditors backed the plan, the U.S. Trustee and a group of creditors have raised objections that could hinder its progress.

U.S. Trustee Andrew R. Vara has outlined several concerns, primarily focusing on the plan’s broad legal protections for those involved in the bankruptcy process, the unfair treatment of smaller creditors, and questionable expenses related to a data breach. Vara argues that the estate has enough funds to treat all creditors more equitably and criticizes the plan for extending legal immunity beyond what is allowed by law.

In a separate objection, Sunil Kavuri, representing the largest FTX creditor group, also takes issue with the plan’s legal protections and argues that creditors should be allowed to receive their claims in cryptocurrency rather than cash, which could help avoid hefty tax burdens.

Despite these challenges, FTX remains optimistic, citing strong creditor support. CEO John J. Ray III believes the plan will allow non-governmental creditors to be fully compensated. The final decision, however, hinges on a confirmation hearing set for October 2024, with FTX expected to submit final voting results to the U.S. Bankruptcy Court before then.

Author

Alexander Stefanov

Reporter at CoinsPress

Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.