In a significant development, FTX Debtors have reached a pivotal settlement to address long-standing customer property disputes. This landmark agreement, known as the “Customer Shortfall Settlement,” is a major step in the ongoing efforts of FTX Debtors to address customer concerns.
The disagreement centered on whether customers possessed property rights in certain assets or were merely limited to unsecured claims on par with general creditors. The Customer Shortfall Settlement provides a resolution to this matter by creating an unsecured yet fair claim for customers against FTX Debtors. This includes specific property that was changed or removed from the exchanges.
The Battle Between FTX Debtors and Customers is Finally Over
This crucial agreement is the result of extensive discussions among the FTX Debtors, the Executive Committee of the Ad Hoc Committee of Non-U.S. Customers, the Official Committee of Unsecured Creditors, and presumptive class representatives. All parties involved have agreed to a Settlement and Plan Support Agreement.
Under the Revised Plan, customers of FTX.com and FTX US can file a “Shortfall Claim” against the General Pool as a means of reimbursement for the estimated value of assets that are absent from their respective exchanges. The value of this claim is projected to be around $8.9 billion for FTX.com customers and $166 million for FTX US customers.
Customers of FTX.com and FTX US could collectively obtain more than 90% of the value available for distribution globally. However, the disbursement of funds to the customers is contingent upon court approval of the plan, which is expected by the second quarter of 2024. It’s crucial to highlight that FTX Debtors foresee that customers of both exchanges may not be fully compensated.
It is anticipated that customers of FTX.com will incur a larger proportion of losses. The FTX Debtors intend to present the Customer Shortfall Settlement as a component of a revised Plan of Reorganization (the “Revised Plan”) to the Bankruptcy Court by December 16, 2023.
If approved, this settlement is projected to pave the way for the approval of the Revised Plan by the second quarter of 2024.
