FTX announces current total assets: Up to 5 billion magnesium can be compensated to the US government, and customers and creditors will be given priority

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The bankrupt FTX exchange stated in a court document filed yesterday (21st) that it expects to negotiate to reduce the amount of bankruptcy claims from the US government to US$3 billion to US$5 billion, but the specific amount may still occur. Variety.

FTX estimates it will have $13.7 billion in assets to pay up to $31.4 billion in legal claims, including $9.2 billion in customer claims and $17 billion in claims from the U.S. Commodity Futures Trading Commission (CFTC) and the IRS.

Customer and creditor claims will take precedence over the U.S. government

Notably, FTX said its clients, Alameda Research lenders, administrative fees and non-governmental creditor claims will receive priority payment ahead of any government and tax claims, which allows clients' repayments to avoid significant dilution from government and tax claims.

The total amount of U.S. tax claims remains uncertain, but once all government and tax claims are paid, the debtors can use remaining proceeds to make distributions to shareholders, the filing said. However, FTX also admitted that FTX investors and shareholders will definitely be harmed by the fraud of founder Sam Bankman-Fried (SBF), and they have little hope of recovering any funds from the FTX bankruptcy case.

FTX also proposes that 100% of SDNY Remission Proceeds (funds or assets returned to the FTX estate by the U.S. Attorney's Office for the Southern District of New York or other government agencies as part of the mitigation process) be used for distribution to FTX.com customers and creditors such as Alameda lenders, including a settlement with BlockFi.

Further reading: Confused about FTX letters? Understand the claims procedures of various entities around the world in one article

FTX compensation order

After deducting administrative expenses and reimbursement of non-governmental creditors, up to 25% of the distributable value will be used to pay U.S. federal income tax claims and the remainder to pay claims from the Commodity Futures Trading Commission and other government agencies, the filing said.

The payment sequence will be:

SDNY proceeds will be distributed to FTX clients and Alameda lenders >> Administrative fees and priority or administrative taxes will be reimbursed >> Claims will be paid until all non-governmental creditors are paid in full in dollar value >> 25% of the remaining value will be used Filing U.S. Federal Income Taxes >> The final remaining assets will be transferred to a civil relief fund, which will be available for payments to creditors who filed a complaint, meaning those creditors are expected to receive the cryptocurrency value that grew between the date of bankruptcy and the date of the complaint.

Previously, FTX said in January that it expected to pay customers "in full", but it would be based on the cryptocurrency price (BTC 16,871, ETH 1258, SOL $16) when it filed for bankruptcy protection in November 2022, making the Many FTX customers are very unhappy.

Extended reading: FTX promises full compensation but the victims “don’t be happy too early”, which will be calculated based on BTC $16870, ETH $1258, SOL $16…

FTX bankruptcy lawyer team again accused of "conflict of interest"

On the other hand, Sullivan & Cromwell (S&C), the law firm responsible for FTX's bankruptcy, was named by legal experts on Thursday due to potential conflicts of interest and ethics charges. According to "The Block", two law students from Temple University and the University of Pennsylvania Professors Jonathan Lipson and David Skeel alleged in a paper published last week that S&C used "deceptive tactics" to seize control of FTX from former CEO SBF and seek private benefits from the Chapter 11 bankruptcy proceedings.

SBF has repeatedly alleged that S&C pressured him to file for bankruptcy protection and force him to appoint John Ray as CEO. FTX creditors filed a class action lawsuit against S&C last month, claiming that the company served as a consultant to FTX before its bankruptcy, understood the operation of the exchange, and ultimately supported its fraud. Two professors said:

S&C may have violated its ethical obligations of confidentiality, candor, and loyalty by reporting these criminal allegations to prosecutors without client consent and deceiving SBF into handing control of FTX to Ray (who S&C selected) with the promise that SBF would play a role in the reorganization important role, S&C must have known these promises were false.

If S&C had waited a few more days to file for Chapter 11 bankruptcy, Bankman-Fried might have received new funding.

A spokesperson for S&C refuted the paper with a statement from FTX:

"In an apparent concerted effort to support SBF, at the expense of his victims and the professionals who worked tirelessly to redress the harm he caused, certain academics and others have repeated his false narrative in an attempt to enhance his standing in the courts that are about to sentence him. status and image.

If SBF's strategy were followed, billions of dollars would be lost or stolen, and the amounts recovered for clients would be a fraction of what we now expect. It’s time to put the blame where it belongs. "

Disclaimer: The content above is only the author's opinion which does not represent any position of Followin, and is not intended as, and shall not be understood or construed as, investment advice from Followin.
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