FTX Modifies Settlement Motion After US Trustee Objection in Bankruptcy Case – What's Going On?
Bankrupt crypto exchange FTX submitted a "Reply" on Sunday, August 20, to back its Settlement Plan and address the US Trustee's objection to the Motion.
On August 16, FTX Trading and its associated debtors submitted a court filing titled "Motion of Debtors for an Order Authorizing Procedures for Settling Certain Existing and Future Litigation Claims and Causes of Action."
The docket outlines a settlement procedure for addressing "Small Estate Claims" totaling approximately $176 million.
This procedure enables them to settle these claims without needing to file motions or give notice to creditors or other parties, except the Official Committee of Unsecured Creditors and the international customer ad hoc committee. Additionally, court approval for settlement terms would not be required.
The same day, the Official Committee of Unsecured Creditors of FTX (UCC) objected to the proposed FTX settlement plan due to dissatisfaction among FTX creditors.
Andrew R. Vara, representing the United States Trustee for Regions Three and Nine (US Trustee), presented the objection filing, citing three independent reasons for the denial.
The US Trustee highlighted that FTX's notification of eligible claims for Settlement Procedures lacks adequacy. The Motion's vague definition of "Small Estate Claims" could encompass a wide range, leaving creditors and relevant parties uninformed. The Trustee insisted on precise claim type definitions and resubmission for a new hearing.
Furthermore, FTX needs more information about the nature and amounts of claims under Settlement Procedures. This information gap prevents the Court from evaluating fairness, reasonableness, and alignment with estate interests—prerequisites for Court-approved settlements.
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