FTX, the troubled cryptocurrency exchange, and its CEO John J. Ray III have filed a motion seeking to reach a settlement of $176 million with Genesis entities.
As per a legal document, FTX Trading and related debtors have formally requested a court mandate to resolve their disagreement with Genesis entities, aiming to settle claims amounting to nearly $176 million. The claims put forth by Genesis entities involve around $176 million in customer claims against FTX Trading and its affiliates.
However, FTX creditors expressed discontent and have urged the Official Committee of Unsecured Creditors of FTX (UCC) to contest the agreement. They point to Alameda’s transfer of significant FTX customer funds to Genesis in 2022 as a concern.
FTX asks court to settle Genesis dispute for a $175 million Genesis claim, the release of a $175 million customer claim and (near worthless) Alameda claims.
Down from first $3.9 billion to $2 billion asserted, this must be the worst deal to date, especially in light of the new… pic.twitter.com/ipxHuWMU4A
— FTX 2.0 Coalition (@AFTXcreditor) August 17, 2023
Alameda currently faces a $140 million avoidance claim, along with an outstanding loan claim of about $40 million. Additionally, claims under section 502(h) of the Bankruptcy Code apply to permissible FTX Claims.
FTX argues that the potential recoveries from Genesis debtors and related entities are unpredictable, making a settlement the optimal means to forestall additional conflicts. Furthermore, FTX’s CEO, John Ray III, submitted a supporting declaration for the motion, advocating for a settlement with Genesis and the associated remedies.
On August 17, the FTX 2.0 Coalition expressed on X (previously referred to as Twitter) that this arrangement from FTX is highly unfavorable, particularly in light of the ongoing DOJ probe into DCG and Genesis. In the post it said,
“Genesis claims are currently worth more than FTX’s even as Genesis lender balances are inflated by the interest they earned from lending, among others, to Alameda.”
Related: SBF jailed, FTX partners under attack: Law Decoded
Anticipating the UCC’s dissent, the coalition foresees objections to the settlement due to the fact that “Alameda used billions of FTX customer funds in 2022 to repay Genesis,” which rightfully belongs to FTX customers.
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Author: Amaka Nwaokocha