FTX settles customer property disputes to speed up bankruptcy proceedings

Bankrupt crypto exchange FTX has reached a proposed settlement with key creditors for customer property disputes in an attempt to resolve the litigation filed against the debtors and confirm an amended payout plan as early as the second quarter of next year.

In a statement released Monday, FTX said such a "Customer Shortfall Settlement" was reached among the FTX debtors, the executive committee of the ad hoc committee of non-U.S. customers, the official committee of unsecured creditors and putative class representatives. 

"The proposed settlement of the customer property issues is another major milestone in our case," John. J. Ray III, chief executive officer and chief restructuring officer of FTX, said. "Together, starting in the most challenging financial disaster I have seen, the debtors and their creditors have created enormous value from a situation that easily could have been a near-total loss for customers."

FTX said that the proposed settlement comes as part of the amended reorganization plan, which is expected to be filed by Dec. 16. FTX explained in a social media post on X that if approved by the bankruptcy court, the settlement will create a special "Shortfall Claim" to facilitate an offer to eligible customers to settle customer preference exposure at an agreed amount.

Shortfall claim

Such a shortfall claim is estimated to be about $8.9 billion for FTX.com and $166 million for FTX US, according to the statement.

"Taking into account both the priority and the non-priority portions of the Shortfall Claim, the FTX Debtors estimate that customers of FTX.com and FTX US would receive, collectively, over 90% of distributable value worldwide if the Amended Plan (incorporating the Customer Shortfall Settlement) is approved by the Bankruptcy Court by the end of the second quarter of 2024," FTX added.

FTX said that it anticipates that customers of both exchanges will not be paid in full "with greater percentage losses by customers of FTX.com."

The official committee of unsecured creditors said in a post on X that the amended plan will help to speed up the Chapter 11 cases and the timeline for creditor and customer recoveries, but "there is still significant work to be done."