A recent update in the FTX bankruptcy proceedings has sparked controversy with the unveiling of an amended proposal that includes an exculpatory clause. This clause, revealed in FTX’s amended plan on May 7, has attracted attention and criticism from members of the cryptocurrency community.

Key Points of FTX’s Amended Proposal

The amended plan introduced on May 7 brings significant alterations to the repayment scheme for creditors. Notably, the proposal ensures substantial compensation and an 11% payout to over 98% of creditors. However, the focal point of contention revolves around the exculpatory clause incorporated within the plan.

The presence of this exculpatory clause has led to criticism from creditors, particularly the FTX Customer Ad-Hoc Committee representing over 1,500 creditors. Sunil, a committee member, expressed concerns about possible misconduct by S&C, highlighting asset sales at notable discounts and failures to relaunch FTX 2.0.

Allegations Against Sullivan & Cromwell

Simultaneously, Sullivan & Cromwell, a long-standing law firm managing FTX’s bankruptcy proceedings, faces accusations of benefiting from FTX’s alleged multibillion-dollar fraud. Reports indicate that FTX owed up to $1.45 billion in legal bankruptcy fees to the S&C law firm, based on compensation disclosures from December 2023.

Meanwhile, creditors have raised worries about S&C’s involvement and the potential conflict of interest stemming from its historical connections to FTX and its participation in various critical transactions.

Outrage Among Stakeholders

FTX creditors and industry experts have shown skepticism and discontent with the amended proposal. Anonymously known FTX creditor Rob, also head of growth at Paradex, expressed strong opposition, referencing concerns about accountability and fairness.

The sentiments shared by creditors echo broader apprehension regarding the proposed compensation structure and the exculpatory clause.

As the future of FTX’s amended plan remains uncertain, stakeholders eagerly await the results of the impending creditor vote. The decision to accept or decline the proposal could profoundly impact the trajectory of the bankruptcy proceedings.