FTX’s new amendment promises “billions of dollars in compensation,” but creditors are unhappy with certain provisions related to law firm Sullivan & Cromwell (S&C).
FTX’s new revised proposal for repaying creditors, announced on May 7, includes an exculpatory clause, a provision that releases certain parties from liability if damages occur during the course of bankruptcy proceedings.
In FTX’s case, S&C may have included a clause absolving it from potential liability, according to Sunil, a popular FTX creditor who is part of the FTX Customer Ad Hoc Committee, the largest group of over 1,500 FTX creditors.
In an X post on May 8, Sunil wrote:
“S&C included an immunity clause so that it could not be held liable for misconduct. They have taken measures such as selling FTX assets at a 70-90% discount to customers and insiders (Ledger .”
The controversial provisions come nearly three months after FTX’s top creditors sued bankrupt company S&C. Creditors alleged that S&C actively participated in “FTX Group’s multi-billion dollar fraud” and that the company benefited financially from FTX’s fraud. The Feb. 16 court filing states:
“S&C was aware of the omissions, false and fraudulent practices of FTX US and FTX Trading Ltd., and the misappropriation of funds by class members. Despite this knowledge, S&C was able to financially benefit from FTX Group’s misconduct and, at least implicitly, agreed to support that misconduct for its own benefit.”
Sullivan & Cromwell is a 100-year-old law firm overseeing FTX’s bankruptcy proceedings. The firm previously acted as an external advisor to the exchange on several transactions, including FTX’s bid for Voyager Digital assets and the acquisition of LedgerX, and reportedly received significant compensation for its services.
FTX had to pay legal bankruptcy fees of up to $1.45 billion to S&C law firm. according to From December 2023 until compensation application.
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Will FTX’s revised plan be rejected?
FTX’s new plan has sparked widespread outrage among cryptocurrency investors, largely due to exemptions that could lead creditors to vote against it, including pseudonymous FTX creditor Rob, who is also Paradex’s head of growth. May 8 postRob wrote:
“This is the icing on the cake for a team that has unlocked billions of dollars of potential value for FTX customers. This cannot be allowed. “I will vote against this plan.”
The FTX debtor said it would pay an 11% dividend to more than 98% of its creditors and provide “billions of dollars in compensation” to the rest, but some have suggested that the debtor will pay holders based on the $16,800 Bitcoin (BTC) price. I don’t think this is unfair, considering that there is. , which was greatly appreciated after the collapse.
According to BitGo CEO Mike Belshe, none of FTX’s creditors will accept this compensation structure. post:
“0% of FTX creditors agree that they will be fully compensated if they receive $16,800 in Bitcoin. “I understand why bankruptcy proceedings have to proceed this way, but let’s not pretend that victims get their money back or that FTX isn’t as terrible as it used to be.”
Related: FTX Address transferred $8.3 million a day before the revised offer deadline.