FTX’s $14+ Billion Bankruptcy Plan Approved in ‘Model Case’

Less than two years after its international headline-grabbing collapse and historic bankruptcy filing, cryptocurrency platform FTX Trading's $14+ billion Chapter 11 reorganization plan was approved. Confirmation allows implementation of a string of novel settlements with governmental authorities and non-U.S. insolvency trustees, clearing the way for FTX to return to all non-governmental creditors substantially more than 100 percent of the amount normally due under the Bankruptcy Code.

The extraordinary efforts of the S&C team coordinating this case were commended by U.S. Bankruptcy Judge John Dorsey in Delaware. Dismissing all remaining objections to the plan, Judge Dorsey lauded it a "model case for how to deal with a very complex Chapter 11 bankruptcy proceeding."

Unprecedented in light of FTX's total lack of reliable financial reporting, accounting or governance systems, the case involved dozens of governmental investigations, hundreds of transactions and litigation disputes, and millions of international creditor claims. It also required multiple complex settlements with competing creditor and customer groups, the IRS, the CFTC, the Department of Justice, numerous states and foreign governments, and seven other insolvency proceedings around world. S&C's unparalleled strength in assembling multidisciplinary teams for major bankruptcies, investigations and litigation enabled a novel strategy to be set and executed with billions of dollars at stake. Confirmation was the capstone of this incredible effort.

Earlier in the year, The Wall Street Journal wrote that this outcome "seemed unthinkable when [FTX] collapsed into bankruptcy in 2022," adding that soon after FTX filed for bankruptcy, customer claims could be purchased for as little as three cents on the dollar. The Journal also remarked on the speed of this recovery, with the plan filed just 17 months after FTX filed for bankruptcy protection and approved five months later. In contrast, it noted: "[A]ccount holders at Bernard Madoff's firm have waited more than a decade and a half for their stolen money to trickle back."

To achieve this outcome, S&C took the lead in negotiating:

• a consensual settlement with all major FTX customer and creditor groups, avoiding the inter-creditor litigation that has plagued other major bankruptcies;
• a resolution of the $24 billion in claims filed by the IRS for periods prior to the Chapter 11 cases in return for a $200 million cash payment and a $685 million subordinated claim;
• agreements with the CFTC and state attorneys' general to subordinate their claims to the payment of non-governmental creditors and with the DOJ over how $1.2 billion of forfeiture proceeds may be distributed to customers and creditors; and
• a court-approved $875 million settlement with BlockFi, FTX's largest creditor.

S&C also took the lead on all aspects of litigation that resulted in numerous key decisions and facilitating settlements that helped to clear the way for plan confirmation and outsized recoveries.

Achieving this result at this speed required coordination of the largest S&C team ever assembled for a single matter. The team was led by Restructuring partners Andy Dietderich, Jim Bromley, Brian Glueckstein and Alexa Kranzley, and S&C lawyers in dozens of other practice areas and offices around the world.