FTX Digital Markets Secure Global Settlement: Positive Outcome For Customers?

In a significant development, FTX Debtors and FTX Digital Markets have announced a global settlement agreement with the Joint Official Liquidators (JOLs) representing FTX Digital Markets. 

The settlement, subject to court approvals, addresses the complex legal challenges arising from the collapse of the FTX group and proposes a mutually beneficial solution.

Consensual Resolution Achieved

The Global Settlement Agreement contains several key provisions to ensure a consensual resolution, according to a recent joint press release:

Firstly, the debtors and FTX Digital Markets will pool their assets, enabling substantially identical relative distributions for FTX.com customers in both proceedings. This coordinated approach aims to prioritize the interests of the company’s customers and deliver consistent outcomes.

Secondly, the agreement allows customers, except insiders and certain excluded customers, to choose between reconciling and receiving payments in the Chapter 11 cases of the debtors or the liquidation proceeding for FTX Digital Markets. 

To minimize potential discrepancies in the administration of the respective proceedings, the debtors and Digital Markets have agreed to reconcile their approaches to the valuation of FTX.com customer claims. 

The valuation of digital assets at the time of the petition will be determined through a consensual approach approved by both the US Bankruptcy Court for the District of Delaware and the Supreme Court of the Bahamas.

Flexibility For FTX.com Customers

According to the settlement announcement, eligible customers can elect the jurisdiction in which they wish to have their claims reconciled and paid. 

FTX Digital Markets anticipates that customers can make this election during the second quarter of 2024, either through Chapter 11 plan ballots distributed by the debtors or a separate proof of debt form filed in FTX Digital Markets’ liquidation proceeding. Customers who do not make an election will have their claims reconciled and paid in the Chapter 11 cases.

Further information regarding the reconciliation and treatment of customer claims and associated risks will be included in the Disclosure Statement prepared by the debtors and approved by the Bankruptcy Court before any customer solicitation.

CEO John Ray III Praises Global Settlement Agreement 

The Global Settlement Agreement also encompasses critical agreements between the debtors and FTX Digital Markets concerning the monetization of assets and inter-estate funding. 

Subject to court approval, FTX Digital Markets will take the operational lead in maximizing the value of the real estate and other assets in The Bahamas and pursuing specific litigation and avoidance actions. The debtors will assume operational leadership for all other recovery activities. 

John J. Ray III, Chief Executive Officer, and Chief Restructuring Officer expressed his satisfaction with the settlement, emphasizing its alignment with customer interests and recognition of the crucial role played by the Joint Official Liquidators and The Bahamas in the recovery efforts.

FTT has experienced a noteworthy surge of 13% within the past few hours, attributed to the favorable resolution achieved between the parties involved in the Chapter 11 cases. As a result, the current trading price stands at $3.7700.

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