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FTX Extends Deadline for Creditor Claims amidst Refund Promise and Distribution Concerns

In a bid to offer creditors enough time to file their claims, FTX Digital Markets has decided to extend the deadline for submitting proof of debt.

FTX, the bankrupt cryptocurrency exchange, has earlier promised to refund its creditors and customers in cash within 60 days of court approval. While this initiative has received positive reviews from some members of the crypto community, others have raised some concerns as they remain skeptical about the distribution process.

Extended Deadline for Proof of Debt Submissions

In a bid to allow creditors enough time to file their claims, FTX Digital Markets has decided to extend the deadline for submitting proof of debt. In a post shared on X by Sunil, an FTX creditor activist, it was revealed that the initial date for submission of the Proof of Debt was May 15, 2024. However, it has now been extended by 10 to 12 weeks, allowing customers to submit a claim in the Bahamas process. The report stated that the new bar date, which is yet to be fixed, will align with the creditors’ voting deadline, allowing them to approve a Chapter 11 reorganization plan in the US process.

Customers of the default FTX are only permitted to participate in either the Bahamas or US process. These two processes refer to two separate legal proceedings related to the bankruptcy of FTX, designed to address the financial obligations of the collapsed crypto exchange. The terms for participating in either of the processes will be filled out to customers by next month, and they have 6 to 8 weeks from the date that disclosures are issued to decide which of the processes they would like to follow. Although there may be a few differences between the two methods, customers should still worry less as distribution will be equivalent and will occur at the same time.

Addressing Complexities: Lessons from the Cryptopia Case

It could be recalled that recently, FTX Estate, an asset and liability of the default crypto exchange, stated that it expects to have between $14.5 and 16.3 billion in cash available for distribution to customers by the time the Delaware bankruptcy court approves a reorganization plan. Despite FTX promising a refund and rolling out a payment approach, customers are already getting frustrated about the delay and ongoing complexities surrounding the FTX bankruptcy.

A crypto analyst, Thomas Braziel, with over 16 thousand followers, took to his X page to express skepticism surrounding FTX payments. He said that should the terms of service be upheld, it’s evident that the customer’s balance does not tally with the asset listed in the debtor’s petition at the time of the FTX bankruptcy filing, resulting in insufficient funds to pay everyone. Thomas then suggested a possible solution to this complexity by citing the Cryptopia case under New Zealand and UK law, where each type of asset was treated as a separate asset. He said:

“Each silo must be filled first, and any excess is shared with other silos. Deficiencies in a silo result in an “excess loss claim” that is dollarized, and these claims share ‘pari passu’ in any un-siloed and excess property from a particular silo.”

Creditors and customers of the collapsed exchange will be watching and anticipating the disclosure document with keen interest. However, the whole process will likely take more time before it materializes.

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