According to Cointelegraph: The ongoing reorganization of FTX has encountered a significant challenge as the US Trustee, Andrew R. Vara, alongside a group of creditors, raised serious objections to the amended reorganization plan proposed by the bankrupt crypto exchange. While FTX claims the plan has received widespread preliminary support from creditors, the US Trustee and the creditors have expressed concerns that could heavily influence the court’s final decision.Broad Legal Exemptions Under ScrutinyA central issue in the Trustee’s objections revolves around the legal protections proposed in the reorganization plan for the estate’s administrators and advisers. Vara argues that these exemptions provide excessive legal immunity, extending far beyond what is typically allowed under existing statutes. He contends that such protections are disproportionate and could undermine the court’s oversight role in the bankruptcy process.Objection of the US Trustee to Confirmation of First Amended Joint Chapter 11 Plan of Reorganization of FTX Trading, Ltd. Source: KrollUnequal Treatment of CreditorsAnother major point of contention is the proposed unequal treatment of creditors based on the size of their claims. The plan suggests that smaller creditors, with claims under $50,000, would receive a lower reimbursement percentage (119%) compared to larger creditors, who could receive up to 143%. Vara questions the fairness of this approach, especially given that the FTX estate is likely to have enough funds to pay all creditors at the same rate. He argues that there is no substantial legal difference between the claims of smaller and larger creditors that would justify this disparity.Data Breach Response CostsThe handling of costs related to a data breach suffered by FTX’s service provider, Kroll, has also drawn criticism. Vara’s filing highlights that estate professionals are seeking millions of dollars in compensation for their response to the breach, raising concerns about the allocation of these costs.Creditors' Additional ConcernsAdding to the complexity, a separate group of FTX creditors, led by Sunil Kavuri, has filed their own complaints. Kavuri advocates for the option for creditors to receive cryptocurrency, such as Bitcoin, instead of cash. He argues that this could help creditors avoid taxable events, potentially improving their overall recovery. Kavuri also points to the example of BlockFi, another bankrupt crypto company, which was able to offer similar in-kind distributions with the assistance of Coinbase, suggesting that FTX could implement a comparable solution.These objections by the US Trustee and the creditor group are likely to play a significant role in the court’s upcoming deliberations on the future of FTX’s reorganization plan.
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