FTX Digital Markets Limited press release
December 19, 2023 - FTX Digital Markets Limited (“FTX Digital Markets”) has successfully negotiated a landmark settlement with FTX Trading Ltd. and its affiliated debtors (together, the “FTX Debtors”) which will see assets combined from the respective estates, enabling a coordinated and accelerated return of significant value to creditors
The Joint Official Liquidators (“JOL”) of FTX Digital Markets have, after months of negotiations, successfully agreed to a Global Settlement Agreement with the FTX Debtors. This is a landmark deal which will pave the way for the return to customers of the proceeds from assets recovered within the insolvent estates.
The innovative solution addresses many of the complex cross-border legal and other issues raised following the collapse of the FTX group, enabling assets to be pooled together for redistribution to FTX.com customers in a way that ensures customers in both proceedings receive, at similar times, substantially identical distributions on their claims.
The Global Settlement Agreement is subject to the approval of the Supreme Court of The Bahamas (the “Bahamas Supreme Court”) and approval of the U.S. Bankruptcy Court for the District of Delaware, which approvals the parties have agreed to seek promptly.
The Global Settlement Agreement includes important agreements between FTX Digital Markets and the FTX Debtors with respect to the monetisation and distribution of the assets of the FTX group.
The parties have agreed that, subject to the approval of both Courts, FTX Digital Markets will take the operational lead in the realisation of real estate and other assets in The Bahamas to maximise recoveries for customers and creditors, together with the pursuit of specific litigation and avoidance actions identified in the Global Settlement Agreement.
The FTX Debtors will take the operational lead in all other recovery activities including any sale transaction involving the FTX.com exchange and realisation of intellectual property. In each case, the parties will cooperate, share information and efficiently utilise the assistance of their respective Courts.
FTX Digital Markets was placed into Official Liquidation on 10 November 2023 with Provisional Liquidators Kevin Cambridge and Peter Greaves of PwC and Brian Simms KC of Lennox Paton appointed as Official Liquidators by the Bahamas Supreme Court.
Peter Greaves, Joint Official Liquidator said:
“This continues to be an exceptionally complex insolvency with a myriad of jurisdictional, technical and practical challenges to work through. For the millions of customers of the FTX Group, based across 230 jurisdictions, this is a landmark breakthrough allowing for collaboration in the monetisation of assets and the adjudication of customer claims, with an approach that provides a roadmap to accelerate the return of funds to customers.”
Brian Simms KC, Joint Official Liquidator said:
“We are pleased, subject to Court approval, to have resolved the adversarial litigation proceedings regarding the disputes between the two estates which raised novel and difficult legal issues in the largest digital asset cross border insolvency to date. In the absence of this resolution, the two estates and their customers would have faced years of protracted litigation and expense without a prospect of an early dividend. This positive outcome will allow the international customers of FTX to submit their claim and receive a dividend in the Bahamas if they so wish.”
ENDS
Notes to editors:
- The Global Settlement Agreement is subject to the approval of the Supreme Court of the Bahamas Court (the “Bahamas Supreme Court”) and approval of the U.S. Bankruptcy Court for the District of Delaware (the “US Bankruptcy Court” and, together with the Bahamas Supreme Court, the “Courts”), which approvals the parties have agreed to seek promptly.
- Know-your-customer procedures will be implemented in a coordinated manner designed to ensure compliance with applicable law in the United States, The Bahamas and all other applicable jurisdictions.
- FTX Digital Markets and the FTX Debtors have agreed to seek to reconcile their approaches to the valuation of FTX.com customer claims in order to minimise potential discrepancies in the administration of their respective proceedings.
- All FTX.com customer claims for cash or digital assets (other than those relating to NFTs) will be valued in both proceedings in U.S. Dollars as of the applicable petition dates, with no differential payments based on post-petition fluctuations in asset prices.
- The valuation of digital assets at the petition date will reflect a consensus approach between FTX Digital Markets and the FTX Debtors, approved by both Courts.
- FTT interests against FTX Digital Markets and the FTX Debtors will be treated as equity and not receive any recovery.
- FTX.com customer preference claims will be reconciled in a common, jointly-administered process between FTX Digital Markets and the FTX Debtors.
- For the purposes of making distributions to FTX.com customers, FTX Digital Markets and the FTX Debtors will pool assets and coordinate the establishment of reserves and the timing and amount of distributions, in order to ensure that FTX.com customers in both proceedings receive substantially identical relative distributions at substantially identical times.
- Subject to the Global Settlement Agreement, all customers of FTX.com (other than insiders and certain excluded customers against whom the FTX Debtors have pending or potential claims) will have the opportunity to elect whether to have their claims reconciled and paid in the liquidation proceeding for FTX Digital Markets in the Bahamas or in the Chapter 11 cases of the FTX Debtors, under elective procedures to be finalised and proposed to the Courts for prior approval. The parties intend that this election by customers will not have material economic consequences for holders of claims.
- Eligible FTX.com customers are expected to make the election on their plan ballot or by a separate process in the second quarter of 2024 to determine the jurisdiction in which they choose to have their claims reconciled and paid. FTX Digital Markets and the FTX Debtors currently anticipate that eligible FTX.com customers will be able to make this election either in a claim form filed in FTX Digital Markets’ liquidation proceeding or in response to Chapter 11 plan ballots distributed by the FTX Debtors.
- FTX.com customers will be required to elect to file their claim either against FTX Digital Markets or the FTX Debtors, and shall not be permitted to file the same claim in both proceedings, releasing their claims in the proceeding that is not elected. Eligible FTX.com customers that do not make any election will have their claims reconciled and paid in the Chapter 11 cases.
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