- FTX’s debtors criticized UCC for seeking asset control amid bankruptcy.
- Chief Restructuring Officer John J. Ray III’s draft plan sparks controversy over returns from FTX’s assets.
- FTX lawyers contest UCC’s control attempt; debtors delay restructuring, sparking a dispute.
Today, Bloomberg reported that the administrators of the bankrupt crypto exchange FTX have garnered attention by raising concerns about certain panel members. According to the report, FTX’s debtors expressed dissatisfaction with traders and market makers within the Official Committee of Unsecured Creditors (UCC), alleging that they are attempting to gain control over the assets.
The controversy gained momentum after the release of a draft reorganization plan by FTX’s recently appointed management led by Chief Restructuring Officer John J. Ray III. The committee representing unsecured creditors raised concerns about insufficient consultation and asserted that FTX could achieve greater returns from its substantial cash and token assets.
In a court submission dated August 9th, FTX issued a response to a statement from the UCC in relation to the reorganization draft plan and term sheet. FTX strongly criticized the UCC’s endeavor to assert authority over the debtors’ assets. This critique emerged subsequent to the UCC’s recommendation that the debtors employ approximately $2.6 billion from their cash reserves to invest in short-term Treasuries, aiming to offset professional fees that could amount to as much as $330 million. Furthermore, FTX’s lawyers remarked:
The creditors perspective] foreshadows an inclination to pursue an unrepresentative plan that vests control of the debtors’ billions of dollars in liquid assets in the hands of unrestricted crypto traders and market makers.
Several creditors and experts have reacted to FTX’s recent submission, contending that the debtors are causing a delay in the restructuring process and disputing the statements put forth by the UCC.
The reorganization team at FTX has managed to reclaim approximately $7 billion in liquid assets from the initial $8.7 billion owed to customers when the exchange entered bankruptcy. However, Kraken FTX co-founder Jesse Powell expressed concerns that relaunching FTX might be more challenging than starting anew. Powell sees the relaunch as a tactic to generate fees from misguided creditors.
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