FTX creditor group representative recommends voting against compensation plan

Sunil Kavuri, a representative of the largest FTX creditor group, has recommended voting against the bankrupt crypto exchange’s reorganization plan.

“Vote NO to the plan,” Kavuri posted on X early Wednesday.

Kavuri maintained his view that the estate should pay out cryptocurrencies in kind rather than the dollar value when the exchange filed for bankruptcy. He argued that the debtors owe FTX customers up to ten times more than the petition prices, claiming that they have “destroyed an estimated over $10 billion” in value for FTX creditors.

FTX's debtors have been criticized previously for their handling of the estate's assets. For instance, they sold a stake in Mysten Labs and token warrents for the Sui token for $96 million shortly before the token went live. These days, the tokens alone would be worth $935 million.

Kavuri made reference to the current lawsuit against the estate's law firm Sullivan and Cromwell over its ties to the exchange prior to its collapse. He claimed that the plan included an exculpation clause “so they and no one involved [can be] sued for misconduct.”

FTX’s reorganization plan

On Tuesday, the FTX estate said it plans to give 98% of its creditors at least 118% of allowed claims, with other creditors receiving full repayment and billions more in compensation for the time value of their investments. 

“We are pleased to be in a position to propose a Chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors,” FTX CEO John J. Ray III said in the release . 

FTX’s proposal intends for the repayments to occur within 60 days after the plan’s effective date. FTX estimated the total value of cash available for distribution to be between $14.5 billion and $16.3 billion, though the plan is still subject to court approval.

The bankrupt FTX exchange was mired in illegitimate behind-door operations by its executives, which led to a liquidity crisis and its ultimate collapse in November 2022. Former FTX CEO Sam Bankman-Fried was found guilty in November 2023 on all seven criminal counts of defrauding FTX customers and investors. Bankman-Fried received a prison sentence of nearly 25 years in March. 

Sullivan Cromwell did not immediately respond to a request for comment from The Block.