As a researcher with extensive experience in bankruptcy law and cryptocurrency litigation, I find the objections raised by Moskowitz Law Firm and Boies Schiller Flexner LLP against the proposed reorganization plan for FTX Trading Ltd. and its affiliates to be of significant concern. The arguments made in the objection highlight several issues that warrant careful consideration.
The law firms of Moskowitz and Boies Schiller Flexner, acting on behalf of numerous plaintiffs involved in the multi-district lawsuit against FTX, have raised objections to the proposed reorganization plan for FTX Trading Limited and its related entities. They contend that the recovery estimates outlined in the plan are misleading and do not factor in the increase in cryptocurrency values since the filing date. As a result, they believe the plan falls short of meeting the transparency standards set forth by Bankruptcy Code Section 1125.
Legal Objections to the FTX Reorganization Plan & Examiner Report
The criticism points out that the reorganization plan’s guarantee of “full recovery” is misleading. This plan proposes returning 129% of the worth of customers’ cryptocurrency accounts as of the Petition Date, which was approximately $17,000 for Bitcoin. However, Bitcoin is currently valued at around $70,000, meaning customers would not receive the true value of their losses. The MDL Plaintiffs contend that the MDL provides a more effective route towards complete economic recovery by enabling claims against non-debtor defendants based on various legal grounds.
The Anti-Double-Dip Provision in the plan implies that any recovery from the MDL would duplicate the recovery from the reorganization plan, which the MDL Plaintiffs dispute. They argue that claims in the MDL are against non-debtor entities for different legal violations, and thus do not duplicate recoveries under the plan. The objection calls for the Disclosure Statement to clarify this and disclose whether the provision precludes further recoveries.
As a crypto investor, I’m concerned about the MDL Plaintiffs’ criticism towards the debtors for leaving out the significant findings of Robert J. Cleary’s Examiner Report from the Disclosure Statement. This report sheds light on potential legal grounds for creditors and unresolved matters that are essential for our understanding of the situation. I believe it is crucial for transparency to prevail, and the debtors must explain how these findings influence the reorganization plan in order for us to make informed decisions.
In the light of contradictory information between the debtors’ stance and the outcome of Sam Bankman-Fried’s (SBF) criminal trial, the Disclosure Statement needs to clarify this discrepancy for customers. The court determined that SBF had misused customer funds, which conflicts with the debtors’ viewpoint. To ensure transparency, the Disclosure Statement should acknowledge this finding and explain its implications on the recovery process for affected clients.
Concerns Over Creditor Representation and Good Faith
The proposed plan features a Consolidated Wind Down Trust where Bahamian joint official liquidators and the Plan Administrator are the sole members of the Wind Down Board, excluding creditor representation. MDL Plaintiffs challenge this setup, asserting it potentially disregards creditor interests and raises doubts about the plan’s good faith under Bankruptcy Code 1129.
Lastly, the role of Sullivan and Cromwell, a party implicated in the MDL, in formulating the proposed plan creates concerns regarding potential conflicts. The opposition demands modifications to safeguard the rights of creditors and ensure adherence to principles of fairness and transparency.
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2024-06-06 10:51