The bankruptcy proceedings of FTX, the now-collapsed crypto exchange, have taken an unexpected turn due to the latest development.
In a newly revealed agreement, the debtors managing the FTX estate have announced plans to set aside up to $230 million from government forfeiture actions exclusively for “preferred shareholders.”
This move surprised many creditors who had overwhelmingly approved the bankruptcy plan before its August 16 deadline.
As it is customary for creditors to be reimbursed before shareholders in bankruptcy cases, the decision to prioritize a select group of shareholders has drawn criticism and sparked controversy within the crypto community.
The provision, formally executed on August 28, was not disclosed until September 27, the final day for filing the amended plan.
Under this agreement, 18% of proceeds from government forfeiture actions will be channeled into a special fund for these shareholders.
This was estimated based on an earlier filing that valued the total proceeds from forfeiture actions, including seized assets from entities linked to FTX, fiat and digital assets from various accounts, and two private planes, at approximately $1.19 billion.
Consequently, the 18% allocation could equate to around $214 million, approaching the $230 million cap. The fund also includes provisions for up to $250,000 for each shareholder's legal fees.
Reactions from the Community
The announcement of FTX’s plan has been met with significant pushback from creditors and the wider crypto community.
Critics argue that setting aside funds for shareholders over creditors contradicts traditional bankruptcy procedures and disadvantages those affected most directly by FTX's collapse.
Notably, FTX's original bankruptcy plan had promised 98% of creditors would receive at least 118% of their claim value in cash.
However, because crypto assets are valued based on prices at the time of FTX’s bankruptcy filing, this payout will represent only a fraction of their current value.
For example, Bitcoin was priced at around $16,000 at the time of FTX’s collapse and has since surged to nearly $66,000.
Therefore, creditors who lost Bitcoin would receive cash based on the old value, significantly reducing their potential compensation to around 10% to 24% of the asset's current worth.
Several voices in the crypto space took to X to voice their concerns. An X user named "Crypto Notte" criticized the plan, accusing FTX of taking $230 million from creditor funds to repay shareholders.
The user framed the bankruptcy process as "criminal," highlighting how venture funds holding equity would benefit at the expense of customers who lost money when the exchange collapsed.
Another X user, "tmnxeq" questioned the rationale of allowing equity holders to take precedence over depositors, even those who are unsecured creditors.
The user further questioned the legal validity of the move and its potential ramifications for future bankruptcy proceedings.
