While FTX's new amended proposal promised “billions in compensation,” creditors are unhappy with one particular clause related to law firm Sullivan & Cromwell (S&C).
FTX's new amended proposal to pay creditors, released on May 7, contains an exculpatory clause, which is a provision that exempts certain parties from liability if damages are caused during the execution of the bankruptcy process.
In the case of FTX, S&C may have included the clause to absolve itself of any potential liability, according to popular FTX creditor Sunil, who is part of the largest group of more than 1,500 FTX creditors, the Client Ad-Hoc Committee. from FTX.
On May 8th mailSunil wrote:
“S&C included an exoneration clause so that they cannot be held responsible for misconduct: selling FTX assets at 70% to 90% discounts to their own clients and insiders (Ledger X, Galaxy), not restarting FTX 2.0 , etc. if we accept the plan. .”
The controversial clause comes almost three months after FTX's main creditors sued the bankrupt company Sullivan & Cromwell (S&C). Creditors alleged that S&C took an active part in the “FTX Group's multimillion-dollar fraud,” alleging that the company benefited financially from FTX's fraud, according to a Feb. 16 court filing:
“S&C was aware of the omissions, fraudulent and lying conduct and misappropriation of group members' funds by FTX US and FTX Trading Ltd.. Despite this knowledge, S&C would benefit financially from the Group's misconduct. FTX and therefore agreed, at least implicitly, to assist such illegal conduct for its own benefit.”
Sullivan & Cromwell is the century-old law firm overseeing FTX's bankruptcy proceedings. The firm previously allegedly acted as outside counsel to the exchange on several deals, including FTX's bid for Voyager Digital's assets and its acquisition of LedgerX, receiving significant payments for its services.
FTX Owed Up to $1.45 Billion in Bankruptcy Legal Fees to Law Firm S&C, Settlement Says filings starting December 2023.
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Will FTX's revised plan be rejected?
FTX's new plan caused widespread outrage among crypto investors, primarily due to the exculpatory clause, which could lead creditors to vote no, including FTX's pseudonymous creditor Rob, who is also Paradex's head of growth. On May 8th mailRob wrote:
“Icing on the cake for the team that destroyed billions of potential value for FTX customers. This can not be allowed. “I am going to vote NO on this plan.”
While FTX debtors said they would give more than 98% of creditors an 11% payment, plus “billions in compensation” to the rest, some do not consider this unfair, considering that the debtors are compensating the holders based on a Bitcoin (BTC) price of $16,800. , which has appreciated significantly since the crash.
None of FTX's creditors will agree to this compensation structure, according to Mike Belshe, CEO of BitGo, writing in a May 8 article. mail:
“0% of FTX creditors agree that receiving $16,800 for their bitcoin is fully compensated. “I understand why the bankruptcy process should work this way, but let's not pretend that victims are getting their money back or that FTX wasn't as terrible as it was.”
Related: FTX Addresses Transferred $8.3 Million One Day Before Amended Proposal Deadline
