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Following the FTX reorganization plan amendment, several complaints have surfaced, with some objections. These concerns came from Andrew R. Vara, the U.S. Trustee overseeing the case, and a group of creditors. They detailed their grievances in the recent documents filed in the FTX bankruptcy proceedings.
Markedly, the FTX estate claimed that many of its creditors approved the amended reorganization plan. However, the U.S. trustee took its time to outline a couple of flaws within the new plan.
U.S Trustee Points Out Flaws With Plan Amendment
Vara highlighted ten of these flaws, including the broad legal exemptions of several individuals and organizations involved with the bankruptcy. He also pointed to unequal reimbursement of creditors by size, as well as the refusal of the bankruptcy estate to carve out costs related to a data breach on its service provider. In his filing, Vara noted that,
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“Estate professionals have sought allowance of millions of dollars in compensation for responding to the Kroll data breach…the Debtors’ estates should not bear that cost. The fee examiner shares this view.”
Convenience Class to Receive Less FTX Distribution
Regarding the unequal treatment of creditors by claim size, the U.S. Trustee noted what the amended reorganization plan states. Customers in the ‘convenience’ classes are billed to receive a percentage distribution of 119%. This is smaller than that of other customers, who would receive up to 143%. The reason for this is simply that their claims are smaller, generally $50,000 or less.
Contrary to this, Vara believes there will be enough cash on the scheduled date to pay convenience claimants the same rate as other customer claims. He believes “There is no discernible difference in the legal attributes of these customers’ claims.”
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FTX to Recoup Funds From Debtors
For now, the FTX estate is trying to recoup funds to repay its creditors. All firms that received any form of donation or contribution from the former CEO of the bankrupt cryptocurrency exchange, Sam Bankman-Fried, have been approached for reimbursement.
The new objections to its amended reorganization plan could be the new impediment to its repayment process.
