For out-of-pocket FTX creditors, the company’s ongoing bankruptcy proceedings pose a number of questions. For example, will victims of the platform’s collapse receive cash or crypto in any ultimate repayment plan?
Ripple Labs’ CTO David Schwartz recently weighed in on the matter, arguing that compensating lost cryptocurrency is unworkable, and that selling and then distributing FTX assets is a more realistic solution.
In a recent post on X, Schwartz dismissed the notion that FTX victims could receive payments in cryptocurrency.
In response to a user’s suggestion that FTX could redistribute crypto assets proportionally among claimants, the Ripple CTO highlighted that insolvency proceedings might ultimately result in the recovery of varying amounts for each asset.
“Say there’s an 85% [total] recovery but 90% of the ETH is recovered. What do you do and who pays for it to be done?” he remarked.
“That’s not really workable,” Schartz stated, concluding that “getting a huge pile of cash to divide among victims as quickly as possible is all we can hope for.”
By emphasizing speed, Schwartz implicitly acknowledges that previous instances of bankrupt cryptocurrency exchanges have left customers waiting years for their payouts.
FTX’s draft bankruptcy plan , negotiated with a committee representing its seven largest creditors, establishes the creation of the ‘dotcom customer pool’ and the ‘US customer pool’ to fund customer claims.
As described in the draft plan, all customers “will constitute a single class, regardless of the type of token or product held and will have a claim in an amount equal to the USD value of their customer entitlements on FTX.com.”
It goes on to state that “where a customer entitlement or other claim reflects an underlying digital asset (other than an NFT), the claim will be liquidated in USD based on the fair market value at the petition time.”
The plan proposes that NFTs should return directly to the relevant customer unless they are missing or some destroyed them.
Upon publishing the draft recovery plan, FTX said it expects to file an amended plan in the fourth quarter of 2023 after working through feedback from stakeholders.