Even FTX shareholders, usually the last to be repaid in bankruptcy, can recoup some of their initial investment – ​​a maximum of $230 million between them – paid using funds recovered by the Justice Department through to lawsuits filed against FTX insiders. .

But despite the expected abnormally high recovery, some creditors still believe they are in a difficult situation due to the way their claims have been assessed.

Many clients held crypto assets such as Bitcoin on the FTX platform, but through a process called dollarization common in bankruptcies, their claims were assigned a dollar value based on the price of those assets on the filing date. balance sheet. When FTX fell, the crypto market was in the doldrums, but it has since reached new all-time highs, meaning some customer claims would be worth a lot more if repayment was mapped to the current value of crypto assets . Therefore, although dollarization is permitted under the bankruptcy code, “saying [the return] is more than 100 percent, that’s simply wrong,” says Yadav. “For the average person, it’s a long way from that.”

Meanwhile, among the parties that stand to gain the most from the plan’s approval are investment firms that have spent millions of dollars buying up claims from people whose assets are stuck in FTX, who have either preferred to accept a discount and reinvest the money, or to have had urgent needs. need funds. These debts were typically bought at a discount before a strong recovery was considered likely — some for less than 10 cents on the dollar — but are now worth multiples of that amount.

“In terms of internal rate of return, holy shit. “It’s the best deal I’ve seen in my life,” says Thomas Braziel, co-founder of 507 Capital, an investment firm that specializes in buying bankruptcy debt and has taken a large position in FTX, and 117 Partners, which negotiates sales. (In July, Braziel was ordered by a Delaware court to repay $1.9 million that he had embezzled as receiver of the bankrupt financial services company Fund.com to make investments and luxury purchases .)

In August, a number of former FTX customers filed formal objections to the project in bankruptcy court. Clients repeatedly objected to the plan’s legal immunity for those who administered the bankruptcy, the likelihood that cash payments would trigger costly taxable events for creditors and other elements of the plan. “I felt vindicated when Bankman-Fried went to jail — and I thought it would go all the way to bankruptcy court,” said Sunil Kavuri, one of the FTX clients who co-signed an objection. “I was unpleasantly surprised.”

During the five-hour hearing, Brian Glueckstein, an attorney with the law firm Sullivan & Cromwell and an advisor to FTX, responded to each objection in turn. “There is no evidence in the record that these debtors are not providing maximum value – none,” Glueckstein said.

In giving his approval, the judge overruled outstanding objections and cleared the way for FTX administrators to begin executing the plan.

It remains possible to appeal against the plan after its confirmation in limited circumstances. Logistical complications could also delay repayments to creditors, which are expected to begin at the end of this year at the earliest. But there remain few realistic options for parties hoping to change the course of FTX’s bankruptcy.

The confirmation hearing “is the last chance, from a practical standpoint, for changes to be made,” Yadav says. “This is the decisive day.”