FTX (CRYPTO: FTT) management is taking issue with traders and market makers on a principal creditor committee, alleging they are attempting to dominate assets without considering the repercussions for other involved parties.
This contention emerged following the release of a preliminary restructuring proposal last month by FTX’s current CEO and Chief Restructuring Officer John J. Ray III, Bloomberg reported.
Unsecured creditors claim they weren’t adequately consulted and argue that FTX could achieve better returns from its substantial cash and token reserves.
FTX’s legal team maintains that there have been thorough discussions with both parties’ representatives. They further suggested that the objections raised by the creditor committee seemed to be influenced by “an unstated agenda specific to the individual members of the committee.”
The lawyers representing FTX stated in their document that the committee’s approach hints at a desire to “vest control of the debtors’ billions of dollars in liquid assets in the hands of unrestricted crypto traders and market makers.”
FTX, founded by disgraced entrepreneur Sam Bankman-Fried, collapsed last November in what authorities describe as one of the most significant financial deceptions in American history.
At the time of its bankruptcy declaration, FTX.com owed its users around $8.7 billion, with approximately $7 billion having been reclaimed to date.
The primary committee of unsecured creditors has suggested that FTX should allocate some of its nearly $2.6 billion in cash to short-term Treasuries, which could generate more income for the bankruptcy estate.
They believe this could help counterbalance professional fees that have already surpassed $330 million in the initial eight months.
On July 31, the committee also recommended that FTX adopt a more structured approach to managing its coin assets, including staking, which involves earning rewards by committing tokens to support a blockchain’s operation.
However, FTX’s consultants countered in their document, pointing out that the creditor committee had been hesitant about asset sales that could offer the estate liquidity at a significant premium.
“The superseding indictment will make clear that Mr. Bankman-Fried remains charged with conducting an illegal campaign finance scheme as part of the fraud and money laundering schemes originally charged,” said U.S. Federal District Judge Lewis Kaplan, who is currently overseeing the case.
They also noted the committee’s delay in monetizing tokens in favor of maintaining extensive crypto holdings.
FTX’s legal team highlighted the challenges of managing access to sensitive, undisclosed details about potential token sales, especially when market makers and traders on the creditor committee are not restricted from trading and have no desire to be.
Larger claimants outside the primary creditor committee haven’t raised concerns, FTX claims.
Former FTX Co-CEO Ryan Salame is currently in talks of a settlement with federal prosecutors concerning the collapse of FTX. The settle includes the forfeit of his private jet.
Produced in association with Benzinga
