FTX creditor group files objection against bankruptcy reorganization plan


A
group
of
FTX
creditors
led
by
Sunil
Kavuri
objected
to
the
reorganization
plan
filed
by
the
defunct
exchange’s
bankruptcy
managers.

According
to
the
June
5
court
filing,
the
creditors
argued
that
the
plan
fails
the
best
interest
test.
Justifying
the
objection,
Sunil
noted
that
it
is
unconfirmable
as
a
matter
of
law
as
it
includes
releases
not
in
the
interest
of
the
estate.
He
added
that
the
plan
also
ignores
property
right
issues.

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Notably,
the
creditors
argued
that
FTX’s
cash
repayment
would
force
a
taxable
event
that
could
be
avoided
through
in-kind
repayment.
As
such,
creditors
would
be
forced
to
pay
tax
on
declared
gains
upon
the
cash
receipts.
They
wrote:

“Because
the
Debtors
state
that
they
will
take
the
position
that
this
‘forced
exchange’
is
a
taxable
event,
it
will
inflict
additional
hardships
on
customers
through
forced
taxation
that
could
be
avoided
by
making
an
‘in
kind’
distribution.”

Kavuri
made
reference
to
the
current
lawsuit
against
the
estate’s
law
firm,
Sullivan
&
Cromwell,
over
its
ties
to
the
exchange
prior
to
its
collapse.
He
claimed
that
the
plan
included
an
exculpation
clause
“so
they
and
no
one
involved
[can
be]
sued
for
misconduct.”

The
creditors
further
stated
that
FTX
must
update
the
disclosure
statement
for
the
IRS
settlement
and
include
the
examiner
report. The
objection
follows
a
recent
agreement
to
settle
tax
claims
with
the
Internal
Revenue
Service
(IRS).

The
settlement
plan
will
see
the
IRS
receive
a

$200
million
priority
claim
within
60
days
after
the
approval.
Additionally,
they
also
receive
another
$685
million
lower-priority
claim
paid
after
customers
have
been
fully
paid.

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On
May
7,
FTX
bankruptcy
managers


announced

a
reorganization
plan
that
would
see
creditors
gain
full
cash
repayment.
Per
the
plan,
creditors
with
claims
below
$50,000
would
be
eligible
for
a
118%
recovery
within
60
days
of
the
court
approval.

Similarly,
other
non-governmental
creditors
would
also
receive
their
total
claims
with
up
to
9%
interest
as
compensation.

Mentioned
in
this
article
Posted
In:

FTX,

Bankruptcy

Go to Source
Author: Oluwapelumi Adejumo


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