From Wreckage To Rebound? FTX, Bahamas Forge Deal As Hope Flickers For Lost Crypto Fortunes

FTX's FTT/USD debtors have reached a settlement with a Bahamian subsidiary, FTX Digital Markets Ltd.

What Happened: The beleaguered crypto exchange is seeking to align bankruptcy proceedings in the U.S. and The Bahamas, ensuring a more streamlined and equitable process for creditors.

The settlement is pending approval from both the U.S. Bankruptcy Court for the District of Delaware and the Supreme Court of the Bahamas.

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Key aspects of the agreement include:

• Asset Pooling and Distribution Coordination: FTX debtors and FTX Digital Markets will pool assets and synchronize reserves, distribution timing, and amounts. This coordination is designed to ensure that FTX.com customers receive similar distributions, irrespective of the jurisdiction in which they present their claims.
• Customer Claim Reconciliation: Certain FTX.com customers can choose to have their claims reconciled and paid either in the Chapter 11 cases of the FTX debtors or in the liquidation proceeding for FTX Digital Markets in The Bahamas. This choice is not expected to have significant economic implications for claim holders.
• Valuation Consistency: Both proceedings will value FTX.com customer claims for cash or digital assets (excluding non-fungible tokens) in U.S. dollars as of the petition dates. This valuation will not be affected by post-petition fluctuations in asset prices.
• FTT Interests And Customer Preferences: FTT interests will be treated as equity with no recovery. Customer preferences will undergo a jointly administered reconciliation process.
• KYC Procedures: FTX Digital Markets will adopt the same know-your-customer procedures implemented by the FTX Debtors, ensuring compliance across jurisdictions.
• Election Process: Eligible FTX.com customers will choose the jurisdiction for claim reconciliation and payment in the second quarter of 2024. Those who do not make an election will have their claims processed in the Chapter 11 cases.
• Asset Monetization and Litigation: The agreement outlines roles for FTX Digital Markets and the FTX Debtors in asset disposition and litigation, aiming to maximize recoveries for customers and creditors.

John J. Ray III, CEO and Chief Restructuring Officer of the FTX debtors, highlighted the settlement as a milestone, emphasizing its focus on customer interests and the collaborative effort with The Bahamas in the global recovery effort.

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