How the Top One-Third of FTX Creditors Are Boosting the Payouts for Everyone Else - Ep. 643
May 10, 2024
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Thomas Braziel, managing partner at 117 Partners, shares his expertise on the intricate FTX bankruptcy plan. He explains how the estate's strategy could lead to payouts exceeding 100% in dollar terms, despite the emotional divide among creditors. Braziel discusses inter-creditor disputes and the controversial 'cramdown' concept, all while highlighting the challenges and criticisms surrounding the plan. He dives into how many depositors lost stablecoins and what this means for the complex recovery narrative in the cryptocurrency landscape.
FTX bankruptcy plan pays out over 100% in dollar terms but faces criticisms from creditors for complexities and inter-creditor disputes.
Ethereum's EIP 7702 proposal aims to enhance security by allowing externally owned accounts to transition into smart contract wallets temporarily.
Robinhood faces SEC scrutiny over potential securities law violations in crypto tokens trading, highlighting evolving compliance standards in the digital currency space.
Grayscale's withdrawal of Ethereum Futures Trust ETF application sparks speculation on strategic motives and reflects regulatory uncertainties in the crypto market.
Deep dives
Binance Criticism Over Handling of High-Value Client Allegations
Concerns arise over Binance's handling of suspicious trading by a high-profile client despite an internal investigation revealing market manipulation. Binance's decision to retain the client and dismiss the investigator escalates industry scrutiny, questioning the platform's prioritization of large clients over market surveillance integrity. Binance refutes allegations, emphasizing its robust surveillance framework for market safety.
Ethereum's EIP 7702 Gains Momentum for Pectra Upgrade
Ethereum's improvement proposal EIP 7702, conceptualized by Vitalik Buterin and team, garners traction for inclusion in the Pectra hard fork. Aimed at enhancing Ethereum, EIP 7702 enables externally owned accounts to temporarily transition into smart contract wallets, enhancing security and user experience. The proposal emerges from community dialogue on preceding EIPs, striving for account abstraction in Ethereum's ecosystem.
Robinhood Crypto Faces SEC Enforcement Action
Robinhood notifies of SEC Wells Notice regarding crypto tokens trading, showcasing potential securities law violations. Disagreements arise as Robinhood maintains the legitimacy of listed assets, countering the SEC's stance on potential token securities. Regulatory scrutiny heightens in the digital currency sphere amidst evolving compliance standards and heightened enforcement efforts.
Grayscale unexpectedly withdraws Ethereum Futures Trust ETF application with the SEC, sparking industry interest. Speculation surrounds the move, with analysts suggesting strategic motives behind the application and subsequent withdrawal. Grayscale's decision aligns with a broader pessimism towards spot ether ETF approval, reflecting regulatory uncertainties within the crypto market.
Fantasy Top and Pump.Fun Surge in DeFi Rankings
Fantasy Top and Pump.Fun gain traction, ranking sixth and seventh among crypto protocols based on fees generated, reflective of growing user engagement. Fantasy Top integrates NFT trading cards, featuring crypto figures, offering users crypto rewards. Pump.Fun stands out for meme coin launches and trading services, showcasing DeFi platforms' innovative approaches to user participation.
Athena and Bibit Partner to Boost USDE Utilization
Athena collaborates with Bibit to enhance synthetic dollar USDE utility for trading perpetual futures, optimizing trading efficiency. USDE will serve as collateral for perpetual futures on Bibit, providing users with additional perks and yield opportunities. The partnership aims to challenge traditional stablecoins by catering to crypto-native users and streamlining trading functions.
Mode's Price Drop Highlights Airdrop Challenges
Mode's price plunge post-airdrop emphasizes challenges faced by recent platform distributions, with significant token value declines. Concerns over airdrop strategies arise amid market skepticism toward allocation processes, witnessed across various airdropping platforms. Community feedback plays a vital role in shaping airdrop outcomes, underlining the need for robust token distribution and liquidity building.
Thomas Braziel, managing partner at 117 Partners, dives into the draft FTX bankruptcy plan, which was praised for paying out at more than 100% in dollar terms, but has a number of intricacies that are drawing criticisms from creditors—including a group that is urging creditors to vote not.
The episode delves into the nuances of the proposed payout, explaining how the estate was able to pay back more than 100% than the dollar value of the claims, why some creditors are being pitted against each other, and why it might get approved even “over the kicking and screaming” of some creditors.
Braziel gives his insights into the the rapid formation of this plan, the controversial role of Sullivan and Cromwell, and the logistical challenges posed by what may end up being paper check payouts.
Show highlights:
Why the plan that was filed this week is such big news
How it was never even possible for creditors to be made whole in crypto asset terms
How the majority of depositors actually had stablecoins on the FTX platform
Why there are “inter-creditor” disputes
What a "cramdown" is and why it's significant in this case
Criticisms of the plan, and why larger investors, especially with crypto holdings, are having their gains socialized
Whether the FTX estate made mistakes by selling some of its positions before they 10x’ed
Why FTX didn't reboot its platform
What conflicts of interest might arise from law firm Sullivan and Cromwell
The tax implications for creditors who are non-US taxpayers
How the claims are going to be distributed
Whether the creditors will favor the proposal and the next steps
