FTX Creditors, UCC Clash over Asset Control, Restructuring Plans

FTX creditors, commanded by chief restructuring officer John J. Ray III, disapprove of traders and market makers within the Official Committee of Unsecured Creditors (UCC) who seek control over assets.

In light of the FTX 2.0 draft restructuring plan, they believe the UCC’s plan to invest nearly $2.6 billion in cash reserves in short-term Treasury securities is a poor idea.

FTX responded to the UCC’s comments regarding the reorganization and term sheet proposal in a court filing dated August 9.

FTX harshly criticized the UCC’s pursuit of asset control, specifically its recommendation that debtors allocate nearly $2.6 billion from cash reserves into short-term Treasuries to cover professional fees totaling up to $350 million.

Screenshot of the debtors’ response to the UCC. Source: Court Listener

Disputes have arisen between the UCC and debtors as a result of creditors’ claims of inadequate consultation and substantial fund depletion by FTX during the bankruptcy filing.

Nonetheless, the Securities and Exchange Commission (SEC) was dissatisfied with the lack of participation and unprofessional conduct exhibited by numerous UCC members.

From the initial $8.7 billion owed to consumers when the exchange entered bankruptcy proceedings, the restructuring unit of FTX has recouped approximately $7 billion in liquid assets.

Certain creditors and specialists have responded to FTX’s recent filing by arguing that the debtors are impeding the reorganization process and contradicting the UCC’s assertions.

The debtors unveiled a strategy for the relaunch of FTX 2.0, while FTX CEO John Ray strives to finalize all outstanding agreements and compensation to facilitate the launch.

Kraken CEO Jesse Powell expressed skepticism regarding FTX 2.0, stating that it is “more difficult than starting from scratch” due to the dearth of a team, technology, licenses, and the brand’s reputation.

In the meantime, FTX has filed a motion to dismiss the Chapter 11 bankruptcy proceedings involving FTX Exchange FZE (FTX Dubai), arguing that the exchange never began providing investors with cryptocurrency-related services.