FTX Prospects Face Potential $10B Loss with Proposed Compensation Plan

• Sunil Kavuri criticizes FTX’s compensation plan for severely undervaluing buyer claims.
• FTX clients will probably lose $10 billion with the proposed plan.
• The plan contains clauses shielding the agency from lawsuits, which can result in declare forfeitures if checks will not be cashed in time.

Creditor activist Sunil Kavuri has voiced robust opposition to the proposed plan of FTX to compensate the defrauded clients of the fallen crypto alternate. Kavur took to X to stipulate his considerations and encourage a collective “NO” vote towards the plan. For context, FTX collectors stand to lose over $10 billion ought to the proposed plan go.

The activist highlighted the proposed compensation construction severely undervalues the claims of FTX clients. Particularly, the plan suggests paying out claims with an 18% return for these beneath $50,000 and a staggered 25% to 47% for claims over $50,000. 

Notably, this gross undervaluation arises as a result of FTX is looking for to pay defrauded clients the financial worth of their belongings as of the chapter submitting reasonably than the precise crypto belongings. Illustratively, Bitcoin traded round $16K when FTX went bankrupt in November 2022 however has since reached $73,750 in 2024.

Notably, this plan was drafted by the regulation agency Sullivan & Cromwell (S&C). Kavuri insists that S&C and the debtors owe clients the present worth of their holdings, which may very well be three to 10 instances the petition costs. The FTX creditor activist argued that S&C is destroying an estimated $10 billion worth of defrauded customers with the plan.

In the meantime, Kavuri highlighted that the regulation agency included an exculpation clause that will successfully defend the agency and different events from lawsuits associated to misconduct. Basically, the regulation agency is looking for to absolve key gamers from obligation which will come up from the plan.

Moreover, the activist identified a clause that might result in the forfeiture of claims if the issued checks will not be cashed inside a six-month window. This stipulation may disenfranchise collectors who could not money their checks promptly.
Finally, Kavuri asserts that every defendant ought to be held chargeable for the total present worth of FTX clients’ losses reasonably than the diminished figures proposed within the plan. In the meantime, some commentators have steered that voting towards this plan could price collectors an extra two years of ready earlier than getting their funds.