Andrew Vara, a US trustee, has pointed out flaws in the FTX reorganization plan. A group of creditors also asked for the FTX estate to change the mode of repayment to cryptocurrency. A US trustee has challenged the current FTX reorganization plan. Alongside the trustee, Andrew Vara, a group of creditors have also asked for better reorganization to meet its needs. While about 95% of FTX creditors voted for the path the FTX estate has taken, these objections may warrant it to look into its plan again to better help all parties involved. Andrew Vara shone a light on multiple concerns, including the level of legal impunity given to the estate’s administrators and advisors. “Pragmatically, such immunity would negate the exceptions for gross negligence, willful misconduct, and fraud. Further,
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- Andrew Vara, a US trustee, has pointed out flaws in the FTX reorganization plan.
- A group of creditors also asked for the FTX estate to change the mode of repayment to cryptocurrency.
A US trustee has challenged the current FTX reorganization plan. Alongside the trustee, Andrew Vara, a group of creditors have also asked for better reorganization to meet its needs. While about 95% of FTX creditors voted for the path the FTX estate has taken, these objections may warrant it to look into its plan again to better help all parties involved.
Andrew Vara shone a light on multiple concerns, including the level of legal impunity given to the estate’s administrators and advisors. “Pragmatically, such immunity would negate the exceptions for gross negligence, willful misconduct, and fraud. Further, such immunity would far exceed the protections that estate professionals whose employment and compensation are subject to Court approval and oversight receive during the case,” a court filing read.
Moreover, Vara claimed the disparity between the amounts received by certain groups of creditors is unfair. The plan seeks to provide 119% of the lost funds as refunds owed to creditors below $50,000, while those owed more than that will receive up to 143%. He argued that the estate has enough funds to provide equal compensation, percentage-wise, to all FTX creditors.
“The Debtors will have enough cash on hand on the Effective Date to pay convenience claimants the same rate as other customer claims,” Vara argued. “There is no discernible difference in the legal attributes of these customers’ claims.”
He has also called into question the millions charged by Kroll’s executives to handle a “security breach”—Kroll being a service provider to FTX’s debtors. “[…] the Debtors’ professionals have billed millions of dollars of fees to respond to the data breach.”
FTX Creditors Demand Repayments in Cryptocurrency
As the US trustee pointed out these flaws, a large group of FTX creditors led by Sunil Kavuri has also called out a blaring issue with the reorganization process. The group claimed that the estate paying the creditors in fiat adds to their burdens due to tax realizations. Furthermore, Kavuri cited the BlockFi incident, in which creditors received their refunds in crypto, emphasizing how FTX can do the same.