Quick Take:

• FTX proposes a plan where 98% of creditors will receive 118% of their claims in cash.
• Non-governmental creditors may also get up to 100% of their claims plus 9% interest.
• Plan subject to approval by Delaware bankruptcy court; marks significant increase from previous estimates.

FTX’s Reorganization Plan:

• Proposal outlines a payout where the majority of creditors receive 118% of their claims in cash within 60 days of court approval.
• Non-governmental creditors may receive 100% of their claims along with up to 9% interest.
• Plan’s approval rests with Delaware bankruptcy court; represents a substantial increase from earlier projections.

Market Dynamics and Cash Availability:

• Despite market recovery, FTX estate attributes cash surplus to asset liquidation and global asset consolidation efforts.
• Estimated cash reserves between $14.5 and $16.3 billion indicate substantial progress in asset recovery and distribution.

Resolution of Claims and Regulatory Agreements:

• FTX’s plan aims to settle claims from regulators like the IRS and CFTC, with agreements in place for subordinated claims and restitution.
• IRS to receive $200 million in cash and a $685 million subordinated claim; CFTC and other entities agree to subordinated claims in favor of user and investor payments.

In a significant development for FTX, the proposed reorganization plan promises substantial payouts for creditors, marking a departure from earlier estimates and instilling optimism amidst the bankruptcy proceedings.

FTX’s commitment to resolving claims and regulatory agreements underscores its dedication to restoring trust and fulfilling obligations to stakeholders. With the plan awaiting approval, June’s scheduled hearing holds pivotal importance in determining the exchange’s future trajectory and the resolution of outstanding matters.

FTX’s new reorganization plan would also settle a host of claims from regulators and government agencies, including the Internal Revenue Service (IRS) and U.S. Commodity Futures Trading Commission (CFTC).

The IRS agreed to resolve its $24 billion in claims in return for a $200 million cash payment and a $685 million subordinated claim that will only be paid out after all creditors and other governmental entities.

The CFTC and other unnamed governmental claimants agreed to subordinate their claims as long as FTX users and investors were paid in full with interest. There are also plans for a special fund created to make “supplemental restitution” to certain customers and creditors, though the details of this agreement have not been finalized, according to the press release.

A hearing to discuss the proposed plan is scheduled for June.