FTX's Draft Reorganization Plan: Zeroing FTT Claims and Subordinating Non-Customer

The document, dated July 31, 2023, outlines the draft plan of reorganization for FTX Trading Ltd. and its affiliated debtors, collectively referred to as "the Debtors."

The Debtors have decided to file this draft plan at an early stage to facilitate creditor feedback and consensual resolution of certain issues. They expect to amend the plan in response to feedback and file an amended plan of reorganization in the fourth quarter of 2023.

Key aspects of the plan include disputes regarding the ownership of assets held on the FTX.com and FTX US exchanges, identification of three primary recovery pools corresponding to segregated assets, and recognition of special "shortfall" claims by the FTX.com and FTX US exchanges for unauthorized borrowing or misappropriation of assets.

The draft also covers the cancellation of intercompany claims, consolidation of the estates of most of the Debtors, subordination of certain claims to the pecuniary losses of customers and creditors, and extinguishment of FTT claims along with other equity interests.

Additionally, the document highlights the liquidation of the Debtors' estates, with distributions to be paid to customers and creditors in cash, subject to certain voluntary elections in connection with a restart of an offshore exchange or otherwise.

The draft plan does not purport to resolve certain open questions under discussion among the Debtors, Consulting Parties, and other stakeholders.

This draft plan of reorganization for FTX Trading Ltd. addresses complex legal and financial matters, including asset pools, treatment of claims, and liquidation procedures. It reflects the current stage of negotiations and investigations and serves as a basis for further discussions and amendments.

Stakeholders are encouraged to review the entire draft plan, as additional modifications and clarifications are expected in the coming months. The document's detailed approach emphasizes the importance of transparency and collaboration in managing the multifaceted challenges faced by the Debtors and their stakeholders.