FTX Unveils Reorganization Strategy, Proposing ‘Offshore Crypto Exchange’ and New Trust

In the midst of the bankruptcy proceedings, FTX presented its primary reorganization strategy and term sheet to the U.S. bankruptcy court, detailing an ambitious plan to reinvent FTX as an “offshore crypto exchange” while also founding a new limited liability trust. At this time, the proposed FTX reorganization plan is targeting a comprehensive settlement between FTX and its creditors, encompassing both customers and associated FTX companies.

FTX Targets Recovery With Offshore Exchange Plan, New Trust Amid Bankruptcy

On July 31, 2023, FTX’s current CEO, John J. Ray III, said the team filed the reorganization plan early in the bankruptcy process to get feedback from creditors. FTX wants to work with creditors in the third quarter of 2023 to amend the plan and file a disclosure statement in the fourth quarter.

Ray thanked the FTX team for reaching this milestone amidst continuing efforts to maximize recoveries for customers and creditors. He also thanked the independent Board of Directors for providing governance and leadership during the bankruptcy process.

The proposed FTX reorganization plan shows that there’s deliberation about launching an “offshore exchange company.” If enacted, creditors could obtain equity or specific tokens that are associated with a newly launched offshore crypto exchange firm.

Debtors have the option of not going forward with an offshore exchange company plan if they believe it would delay the effectiveness of the bankruptcy proceedings. Debtors can object if there are “regulatory concerns” or the plan fails to “yield material incremental value to holders of Dotcom Customer Entitlements.”

As part of its bankruptcy reorganization plan, FTX is also considering setting up a new trust company called “FTX Ventures Trust.” This trust would hold FTX’s investments in private startup companies and digital tokens that FTX does not plan to sell right after exiting bankruptcy.

The purpose of the trust would be to manage these long-term investments and distribute cash from them over time. FTX has not yet decided if the trust would be owned by FTX’s bankrupt estate or traded separately after bankruptcy. The goal is to find a way to maximize the value of these illiquid investments that cannot be easily sold by FTX’s administrators after bankruptcy.

FTX’s native cryptocurrency, FTT, surged in value after the proposed plan was published on July 31, 2023, rising from $1.35 to a high of $1.52. However, its price fell back to $1.37 on Tuesday, August 1.

What do you think about FTX rebooting the now-defunct crypto exchange and the company setting up a new limited liability trust? Share your thoughts and opinions about this subject in the comments section below.