FTX sparks controversy over $230 million payout to “special” shareholders
Bankrupt cryptocurrency exchange FTX will set aside up to $230 million to pay some shareholders.
Under a new agreement reached between the parties, the bankruptcy trustee will set aside up to $230 million of recovered assets to pay some shareholders.
The deal came as a surprise to many creditors, as creditors are traditionally the ones who are supposed to pay out assets before shareholders in the event of bankruptcy. Creditor Sunil Kavuri said that most creditors and FTX users were unaware of the deal when they voted to approve the payout plan in mid-August.
The deal was only announced on September 27, although the FTX trustee is believed to have been working on it since August 28.
FTX will set aside 18% of its total assets seized by the US government for a special fund to serve the interests of a small group of shareholders, with a value of up to $230 million. This includes more than $600 million in Robinhood shares, fiat and crypto assets seized from other exchanges worth $379 million, $150 million in cash in bank accounts, and two private jets worth $35 million.
As reported, FTX's customer compensation plan estimates that 98% of creditors will receive up to 118% of their assets. However, Mr. Kavuri asserted that this is a distorted statement, because the value of FTX's recovered assets is calculated at current market prices, while it compensates users at the crypto price at the time of the exchange's bankruptcy, which is November 2022. Kavuri estimates that users will only receive 10-25% of their assets back at current market prices.
Bitcoin was worth around $16,000 when FTX went bankrupt. According to the repayment plan, users who lost 1 BTC on FTX will be paid $16,000 in cash, instead of 1 BTC or $66,000 at current prices. However, FTX's bankruptcy unit claims that it cannot pay its debt obligations in crypto due to pressure from the US Securities and Exchange Commission (SEC), which is accusing many cryptocurrencies of being securities.
The US bankruptcy court is expected to hold an official hearing on October 7 (US time) to approve the above repayment plan.
The FTT token price increased by 110% over the weekend for no apparent reason.
