FTX debtors slam UCC’s asset control bid in restructuring plan

According to CEO and chief restructuring officer John J. Ray III, FTX debtors have expressed disapproval of traders and market makers within the Official Committee of Unsecured Creditors (UCC). These individuals are aiming to gain authority over assets. The debtors believe that the UCC’s plan to invest nearly $2.6 billion in cash reserves in short-term Treasurys is a bad idea considering the FTX 2.0 draft restructuring plan.

In the court filing submitted on August 9, FTX responded to the UCC’s remarks concerning the reorganization and proposal for a term sheet. FTX strongly critiqued the UCC’s approach in seeking control over assets, especially their suggestion to allocate approximately $2.6 billion from cash reserves into short-term Treasurys. The intent behind this allocation was to cover professional fees amounting to $330 million.

Disputes have arisen between the UCC and debtors due to creditors asserting insufficient consultation and significant fund depletion during FTX’s bankruptcy filing. However, numerous UCC members were criticized by the United States Securities Exchange Commission for their limited engagement and unprofessional behavior.

FTX’s restructuring unit has successfully recovered around $7 billion in liquid assets. This is from the initial $8.7 billion owed to customers during the exchange’s bankruptcy proceedings. However, some creditors and specialists have raised concerns about specific debtors hindering the reorganization process and challenging assertions made by the UCC.

FTX 2.0 faces challenges and skepticism

The debtors have revealed a strategy for the relaunch of FTX 2.0. Ray is working to finalize all agreements and outstanding remuneration to ensure a smooth launch. However, Kraken CEO Jesse Powell has expressed doubt about FTX 2.0, stating that it poses greater challenges compared to starting from scratch. He cites the lack of a team, technology, licenses, and damage to the brand’s reputation as significant concerns.

Meanwhile, FTX has requested the dismissal of the Chapter 11 bankruptcy proceedings concerning FTX’s Exchange FZE (FTX Dubai). They argue that the exchange never provided cryptocurrency-related services to investors.

Furthermore, FTX’s, one of the world’s largest cryptocurrency exchanges, faced a significant setback in April 2021. The exchange lost access to its private keys and encountered a wave of legal proceedings from customers, regulators, and creditors. Currently, FTX is undergoing a multifaceted and contentious restructuring process. The goal of this process is to revitalize its operations and repay its debts.

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