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Lawyers representing FTX’s creditors said they weren’t filled in on a recently proposed plan to revive the company’s international exchange, according to a Monday night filing.
Creditors claimed that the proposed restructuring plan is a mere “idea” with no formal talks having taken place to actually put it into action.
No Contact With Creditors?
The claimants’ statement accused FTX’s lawyers of breaking their promise to provide a public roadmap for the bankruptcy proceedings and to work with creditors on a successful reorganization plan.
Instead, debtors ignored creditors’ suggestions for restructuring, which were not formally negotiated. Though the plan has been released in line with a pre-established deadline, creditors claim that what has been proposed only presents an “illusion” of progress.
“Unfortunately, what was supposed to be a watershed moment for these bankruptcy cases—the filing of a plan of reorganization preceded by robust, good faith negotiation and collaboration—is anything but,” read the filing.
FTX’s plan – put forth earlier that day – was to divide the exchange’s creditors into distinct classes based on whether they worked with FTX US, or the much larger international exchange. Members of each class would receive a “pro rata share” of each exchange’s asset pool.
Both FTX CEO John Ray III and the company’s former boss, Sam Bankman-Fried, have claimed that FTX US funds were kept separate from FTX and Alameda’s, with the latter claiming that the US branch is 100% solvent.
The plan’s release was coupled with a 10% rise in the price of FTT – which collapsed as FTX filed for bankruptcy in November. Yet according to creditors, this is no “plan,” but merely the debtors’ “ideas for a plan.”
Specific Problems With The Plan
Specifically, the plan did not address how creditors would select qualified parties to manage FTX, post-restructuring. Creditors also want a say on how the exchange could launch a “regulatory-compliant recovery token,” and how to most fairly compensate those “most injured by the fraud that occurred.”
Finally, creditors showed dismay at the massive legal fees that debtors have incurred throughout the entire bankruptcy process, despite initially providing them with a blueprint to stay frugal.
The cases are now on track to be “among the most expensive in history,” having burned an average of $50 million per month on professional fees since the exchange went down.
“The Committee is extremely disappointed that the Debtors have not engaged with the Committee on these issues nor yet discussed them with its members to appreciate their import,” creditors added.
Many have expressed skepticism that FTX could pull off an effective reboot, with investors like Anthony Scaramucci suggesting that the exchange would require a total rebranding at a minimum.