FTX creditors oppose restructuring plan, saying cash repayment will lead to tax problems

The FTX creditors group led by Sunil Kavuri has submitted an objection to the court against the restructuring plan proposed by the FTX bankruptcy administrator. The creditors pointed out that the plan did not pass the best interest test, contained provisions that were not in line with the interests of the estate, and ignored property rights issues.

The creditors stated that cash payments would result in customers having to pay taxes on the cash received, thereby increasing their burden. They suggested using physical payments to avoid tax issues.

In addition, the creditors requested that FTX update its disclosure statement regarding the settlement with the Internal Revenue Service (IRS). Under the settlement plan, the IRS will receive a priority claim of $200 million within 60 days of approval, and a subordinated priority claim of $685 million will be paid after customers have fully paid their claims.

FTX's restructuring plan includes paying 118% compensation to creditors whose claims are less than $50,000, and other non-government creditors will receive full claims and up to 9% interest compensation.