FTX Creditors Criticise New Compensation Plan

Sunil Kavuri, a representative of the largest group of FTX creditors, has opposed the exchange’s compensation plan, arguing it limits recipients’ options and absolves certain accused parties of responsibility.

FTX Plan

Takeaways
1) Sullivan and Cromwell included exculpation clause so they + no one involved sued for misconduct
2) S&C puppet John Ray in charge with no accountability
3) Petition prices + 18% (<$50k; 25% to 47% >$50K)
4) Cheques paid
5) Lose claim if cheques not cashed…

— Sunil (FTX Creditor Champion) (@sunil_trades) May 8, 2024

The proposal, presented on May 7, includes an “exculpation clause” for the law firm Sullivan & Cromwell (S&C), which releases it from any potential liabilities.

Among other shortcomings, Kavuri highlighted the plan’s fiat payments instead of cryptocurrency. He also noted that creditors’ losses would total approximately $10 billion due to asset valuation at the time of bankruptcy declaration.

“S&C included a liability release clause. If we accept the plan, they cannot be held accountable for misconduct — selling FTX assets at 70% to 90% discounts to their own clients and insiders (Ledger X, Galaxy), refusing to relaunch FTX 2.0, and so on,” he noted.

On February 16, a group of creditors filed a lawsuit against the law firm for actively aiding in the “multi-billion dollar fraud of the FTX Group.” According to the lawsuit, S&C was aware of the company’s misconduct and benefited financially from it.

According to compensation documents from December 2023, FTX owed the law firm approximately $1.45 billion for overseeing the bankruptcy process.

An anonymous creditor under the pseudonym Rob called the immunity for S&C the “icing on the cake” of this plan. He refused to vote for the proposal.

Icing on the cake from the team that destroyed billions of potential value for FTX customers. This can’t be allow.

I’m voting NO on this plan@sunil_trades https://t.co/RvZbRy62GQ

— ☈ob (@SonOfAres__) May 8, 2024

Approval of the compensation plan requires the consent of more than half of FTX’s creditors. Voting on the document will take place in June.

According to BitGo CEO Mike Belshe, none of the company’s creditors will accept such a compensation plan.

0% of FTX creditors agree that receiving $16800 for your bitcoin is fully compensated.

I understand why the bankruptcy process needs to work this way but let’s not pretend victims are getting their money back or that FTX wasn’t as awful as it was. https://t.co/odVp4rT7hP

— Mike Belshe (@mikebelshe) May 8, 2024

“0% of exchange clients agree that receiving $16,800 for bitcoin fully compensates their losses. I understand why the bankruptcy process needs to work this way, but let’s not pretend victims are getting their money back or that FTX wasn’t as awful as it was,” he wrote.

Previously, former CEO of FTX’s Bahamian division, Ryan Salame, transferred ownership of his $5.9 million home in the Bahamas to creditors as restitution.

Back in March, the founder of the trading platform, Sam Bankman-Fried, was sentenced to 25 years in prison. His lawyers appealed the decision.