FTX’s revised proposal for compensating creditors has caused dissatisfaction among investors due to a specific clause related to law firm Sullivan & Cromwell (S&C). This exculpatory clause, which absolves certain parties of liability in the event of damages during the bankruptcy process, has raised concerns among FTX creditors, including Sunil from the FTX Customer Ad-Hoc Committee.
Sunil, in a post on May 8, expressed his reservations about the inclusion of the exculpatory clause. This provision comes after three months of FTX’s top creditors filing a lawsuit against S&C, accusing the law firm of actively participating in FTX Group’s fraudulent activities and benefiting financially from the fraud. The court filing on February 16 highlighted S&C’s role as the century-old law firm overseeing the FTX bankruptcy proceedings and its previous involvement as outside counsel in various FTX deals.
According to compensation filings from December 2023, FTX owed S&C up to $1.45 billion in legal bankruptcy fees. The inclusion of the exculpatory clause in FTX’s amended plan has sparked outrage among crypto investors, including Rob, a pseudonymous FTX creditor and the head of growth at Paradex. Rob argued that the proposed compensation, which includes an 11% payout to over 98% of creditors and “billions in compensation” to the remaining creditors, is unfair considering the appreciation of Bitcoin’s value since the collapse.
Notably, none of the FTX creditors are willing to accept this compensation structure, as stated by Mike Belshe, the CEO of BitGo. The dissatisfaction with FTX’s amended plan raises questions about its chances of being approved by the creditors.
Amidst the controversy surrounding FTX’s collapse, on-chain analyst explains the impact on Bitcoin, and it has been reported that FTX addresses transferred $8.3 million just one day before the deadline for submitting the amended proposal.