FTX Reorganization Gains Approval Amid Legal Turmoil by Former Executive

By: Isha Das

Bankrupt crypto exchange FTX announced substantial preliminary support for its reorganization plan from creditors, with over 95% endorsing the proposal, representing 99% of the claims by value. This resounding approval signifies a strong consensus among creditors toward the plan.

FTX CEO John J. Ray III stressed the importance of this backing, highlighting that the plan's innovative structure aims to return 100% of bankruptcy claim amounts plus interest for non-governmental creditors. Ray noted, "Importantly, the Plan’s innovative structure provides for the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors and resolves complex disputes with dozens of governmental and private stakeholders."

Despite the overwhelming support, critics argue that FTX's approach places creditors at a disadvantage by valuing assets based on their prices in November 2022, when FTX declared bankruptcy, rather than considering current market values. Nevertheless, FTX remains confident that the plan will surpass the acceptance thresholds required under the Bankruptcy Code.

FTX plans to submit the final voting results to the US Bankruptcy Court for the District of Delaware ahead of the Confirmation Hearing, slated for October 7, 2024.

Legal Action by Former Executive

As the FTX reorganization plan garners support, the legal landscape surrounding the exchange continues to evolve. Ryan Salame, a former executive at FTX, recently filed a lawsuit against the US government. Salame alleged that the government reneged on their deal not to pursue campaign finance charges against his partner, Michelle Bond, which was a crucial component of his plea agreement.

Salame took to social media platform X to explain his actions, stating, "It’s all true but I just made a court filing I’m pretty nervous about because I know it means the most powerful body in the world is going to come at me and my loved ones again, but I’m hoping it encourages more people to be honest and tell the truth and expose un-American tactics."

Salame, along with other former FTX executives including Alameda CEO Caroline Ellison, Nishad Singh, and Gary Wang, had confessed to various crimes connected to their roles at the now-defunct exchange. Salame is set to begin his 7.5-year prison sentence on October 13 and has been ordered to pay over $6 million in forfeiture and more than $5 million in restitution.

His lawyers argue that the government has breached the plea deal by renewing its investigation into Bond, who is the CEO of ADAM. They insist that the government failed to honor its commitment to cease the investigation subject to Salame's cooperation.