May 8, 2024
FTX proposal controversy
Latest Cryptocurrency News

FTX’s Proposal Sparks S&C Controversy: Creditors Displeased

Controversy Surrounds FTX’s Latest Proposal

FTX’s recently amended proposal, unveiled on May 7, has sparked significant controversy among creditors, primarily due to a contentious clause related to law firm Sullivan & Cromwell (S&C). The proposal, aimed at repaying creditors, includes an exculpatory provision shielding certain parties from liabilities during bankruptcy proceedings. Despite FTX’s promise of “billions in compensation,” creditors are expressing dissatisfaction with the implications of this clause, leading to heated discussions.

Questioning S&C’s Role in FTX Affairs

The inclusion of the exculpatory clause has raised questions about S&C’s involvement in FTX’s bankruptcy proceedings. Sunil, a prominent FTX creditor representing the FTX Customer Ad-Hoc Committee, voiced concerns about potential misconduct tied to the clause. Sunil’s recent remarks highlight S&C’s perceived efforts to protect itself from liabilities associated with FTX’s asset sales and operational decisions, citing discounted sales to insider clients and delays in restarting FTX 2.0 as contentious issues.

Legal Battles and Financial Interests Collide

The ongoing controversies between S&C and FTX creditors trace back several months. Leading FTX creditors previously initiated legal actions against S&C, alleging the firm benefited financially from FTX’s alleged fraudulent activities. Court filings from February 16 underscore claims that S&C was aware of FTX’s deceptive practices and chose to support them for financial gain. These legal disputes add layers of complexity to FTX’s bankruptcy proceedings, casting doubt on the fairness and transparency of the proposed compensation plan.

Debtors’ Offer and Creditor Discontent

Despite FTX debtors’ assurances of substantial compensation to creditors, including an 11% payout to the majority and additional compensation to others, the proposed plan faces widespread disapproval. Rob, a pseudonymous FTX creditor and industry professional, expressed dismay over the exculpatory clause and the perceived inadequacy of compensation, signaling potential roadblocks for FTX’s restructuring efforts. Mike Belshe, CEO of BitGo, echoed these sentiments, highlighting the disparity between proposed compensation and actual losses, particularly given Bitcoin’s substantial post-collapse appreciation.

Murky Waters Ahead for FTX’s Proposal

As FTX’s amended proposal undergoes scrutiny and encounters dissent from creditors, the fate of its restructuring efforts hangs in uncertainty. The contentious issues surrounding S&C’s role and the compensation structure underscore the intricate balance required between legal, financial, and ethical considerations in high-stakes cryptocurrency bankruptcy proceedings. The forthcoming discussions and negotiations will likely intensify, highlighting the challenges of navigating stakeholders’ interests amidst legal complexities and evolving market dynamics.

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