FTX Cryptocurrency Exchange Gains Initial Approval for Reorganization Scheme as Creditors Overwhelmingly Back Plan, Setting Stage for Bankruptcy Settlement

The digital currency powerhouse Bitcoin BTC/USD along with the digital asset exchange FTX Trading, which entered bankruptcy proceedings in November 2022, has secured initial approval for its restructuring plan from its debt holders.

What Happened: It was disclosed that an overwhelming majority of creditors entitled to vote have thrown their support behind FTX’s modified plan of reorganization. The Wall Street Journal reported that over 95% of voting creditors were in affirmative consensus regarding the plan.

Conclusive voting outcomes are anticipated to be presented to the court overseeing the bankruptcy for appraisal ahead of the appointment for confirmation scheduled for October.

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Why It Matters: The substantial endorsement of FTX’s plan for reorganization follows a period of significant upheaval for the business. This month, a judge in the United States demanded that FTX and Alameda Research restitute and disgorge $12.7 billion to their creditors, according to a ruling.

This judgment stems from a legal action brought forth by the Commodity Futures Trading Commission, which accused the two companies of fraudulent misrepresentation of the operational state of FTX.

Prior to this, in July, Silvergate Capital—a bank severely affected by FTX’s collapse—was the target of a lawsuit by the Securities and Exchange Commission for allegations of securities fraud, with several former executives of Silvergate named in the suit.

During June, customer dissent arose against FTX regarding a proposed plan for liquidation. While the plan proposed cash reimbursements for customers, some expressed dissatisfaction with the proposed terms. FTX maintained that it had recouped $16 billion worth of assets, inclusively of $12 billion in cash, asserting the sufficiency of these funds to settle all claims by customers fully.

Additionally, in earlier times this year, FTX’s originator Sam Bankman-Fried was handed a 25-year prison sentence.

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This article was produced with assistance from Benzinga Neuro before receiving edits by Kaustubh Bagalkote