FTX Digital Markets Liquidation Resolved with Global Settlement

Crypto News- The recent twists in the saga surrounding the dramatic collapse of FTX, the cryptocurrency exchange led by Sam Bankman-Fried, have taken a compelling turn with a major announcement on Tuesday. FTX Trading Ltd., the company behind the FTX exchange, has entered a comprehensive global settlement agreement with its subsidiary, FTX Digital Markets Ltd., currently undergoing court-ordered liquidation in the Bahamas.

FTX Digital Markets Liquidation Resolved with Global Settlement

The intricacies of navigating simultaneous bankruptcy proceedings in the US and liquidation in the Bahamas have driven this settlement. FTX Trading Ltd., having filed for Chapter 11 bankruptcy protection in the US, disclosed that the agreement awaits approval from both the US Bankruptcy Court of Delaware and the Supreme Court of the Bahamas. If given the green light, this groundbreaking resolution would set the stage for a unique synchronization of bankruptcy and liquidation processes across different jurisdictions.

The global settlement strives to foster collaboration between FTX Trading Ltd. and the joint official liquidators overseeing the wind-down of FTX Digital Markets Ltd. Their joint efforts include consolidating assets, aligning creditor payouts, and establishing unified policies for valuing claims and overseeing proceedings.

Key elements of the settlement agreement include:

• Coordinating timing and distribution amounts for FTX customers in both proceedings to ensure fair payouts for creditors.
• Allowing FTX users (excluding insiders and certain clients) to opt for the jurisdiction for processing their claims—whether it’s the US bankruptcy court or Bahamas liquidation.
• Harmonizing approaches to valuing FTX customers’ digital asset claims to minimize discrepancies.
• Evaluating non-NFT crypto and fiat claims of FTX clients in US dollars as of the petition date, ignoring post-bankruptcy price fluctuations.
• Treating FTT token interests as equity, making them ineligible for payouts in either jurisdiction.
• Creating a coordinated preference policy for reconciling transactions flagged for clawback actions across both proceedings.
• Implementing unified know-your-customer procedures for verifying customer identities.

Amidst FTX Chaos, Settlement Proposes a Ray of Hope

The settlement brings clarity to the operational responsibilities of each party. FTX Digital Markets will spearhead efforts to monetize assets in the Bahamas and pursue specific litigation, while FTX Trading Ltd. will take charge of all other recovery endeavors. Both entities have pledged full cooperation and information sharing.

This agreement marks a significant milestone in unraveling the legal and financial intricacies resulting from FTX’s collapse in November 2022, attributed to liquidity issues and allegations of mismanaged funds. Sam Bankman-Fried, the founder, recently faced legal consequences, with US prosecutors finding him guilty on seven counts, including wire fraud.

While the settlement offers optimism for a more coordinated approach to fund recovery for creditors, potential FTX account holders are cautioned that the agreement may undergo revisions before final approval. John J. Ray III, CEO and Chief Restructuring Officer of FTX Debtors, expressed optimism about the settlement, emphasizing its customer-centric nature and the crucial role played by the Joint Official Liquidators and The Bahamas in the global recovery effort.

Further insights into the proposed treatment of customer claims are expected when FTX Trading Ltd. releases its disclosure statement to the bankruptcy court. Presently, the announced agreement signifies a tentative step forward in streamlining the complex situation, paving the way for a more unified approach to maximizing creditor recoveries in parallel FTX bankruptcy and liquidation proceedings.