FTX has been granted court approval to seek input from creditors regarding the preference to receive their recovered funds either in cash as per FTX's current liquidation proposal or in cryptocurrency at its present market value. The voting plan approval was granted by United States Bankruptcy Judge John Dorsey on June 25. FTX creditors expressed dissatisfaction with the initial liquidation plan in May, offering a 118% return to 98% of creditors with claims under $50,000, based on U.S. dollar asset prices at the time of the bankruptcy filing in November 2022. However, many creditors are inclined towards receiving their payout in cryptocurrency to align with the significant 165% surge in the crypto market since the exchange's collapse.

To provide context, Bitcoin was valued at approximately $16,900 during the bankruptcy filing, showing a remarkable 265% growth to $61,770 currently. The voting process aims to engage FTX customers who have not participated in the repayment discussions yet, as conveyed during the court hearing by FTX's lawyer, Andy Dietderich.

FTX's legal representatives emphasized the necessity to assess claims based on the filing time of Chapter 11, aligning with their proposed plan. They highlighted the advantage of the proposed cash repayment scheme, which would alleviate creditors from capital gains tax implications. It is important to note that creditor endorsement for in-kind crypto repayments does not automatically guarantee court approval.

Creditors have until Aug. 16 to vote on the plan, as per court documents, with Judge Dorsey's decision on plan approval expected by Oct. 7. FTX has so far recovered $11.4 billion in cash post-bankruptcy filing, with projections to increase to $12.6 billion by Oct. 31, coinciding with the potential enactment of FTX's Chapter 11 plan.

FTX, once a prominent player in the cryptocurrency exchange arena, faced a significant downfall in November 2022. An estimated $8 billion in funds were mishandled, notably by FTX's trading entity Alameda Research, resulting in a liquidity crisis when customers requested fund withdrawals. The defunct platform is now under the guidance of FTX's current CEO, John Ray, who is actively involved in the bankruptcy proceedings.

In a related development, FTX's former CEO, Sam Bankman-Fried, was found guilty on multiple fraud and money laundering charges in November 2023, receiving a 25-year prison sentence in March. The crypto industry is closely watching the outcome of the FTX liquidation process, highlighting the intricacies and challenges faced by cryptocurrency exchanges in handling customer funds.