FTX Debtors Furious! Amended Bankruptcy Plan Raises Conflict of Interest Concerns

In a recent twist in the FTX bankruptcy case, a significant update has caused a stir in the cryptocurrency world. On May 7, FTX revealed a revised plan, promising substantial changes to how creditors would be repaid. However, the addition of an exculpatory clause in this plan has sparked controversy.

Here’s everything you need to know about it.

Understanding FTX’s Amended Proposal

The updated proposal, presented on May 7, lays out a new strategy for repaying creditors. Notably, it promises significant compensation, ensuring that over 98% of creditors receive an 11% payout.

However, the focal point of contention revolves around the exculpatory clause embedded within the plan.

The inclusion of this legal provision has led to concerns, particularly from the FTX Customer Ad-Hoc Committee, representing over 1,500 creditors. Committee member Sunil has voiced worries about potential misconduct, citing instances of asset sales at reduced prices and the failure to restart FTX 2.0.

Allegations Against Sullivan & Cromwell

Meanwhile, Sullivan & Cromwell, a century-old law firm overseeing FTX’s bankruptcy proceedings, faces accusations of benefiting from FTX’s alleged multibillion-dollar fraud. However, it was found that FTX owed up to $1.45 billion in legal bankruptcy fees to the S&C law firm, based on compensation filings from December 2023.

In light of these allegations, doubts linger about Sullivan & Cromwell’s impartiality, given its historical connections to FTX and its role in key transactions.

Creditor Discontent

FTX’s creditors, along with industry experts, have expressed dissatisfaction with the revised proposal. Rob, a pseudonymous FTX creditor and head of growth at Paradex, is among those criticizing the lack of accountability and fairness in the plan.

As the fate of FTX’s amended plan hangs in the balance, attention turns to the upcoming creditor vote. The decision on whether to accept or reject the proposal holds significant sway over the bankruptcy proceedings.

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FTX’s fate hangs in the balance. What do you think of the proposed plan? Share your thoughts.