FTX Trading seeks approval to settle smaller litigation claims

By Sarah Lizee

Olympia, Wash., Aug. 8 – FTX Trading Ltd. is seeking approval of procedures for the settlement of litigation claims and causes of action that are of relatively small value compared to the debtors’ total asset base, according to a motion filed Monday with the U.S. Bankruptcy Court for the Southern District of New York.

The company said that for months the debtors have been conducting a strategic review of potential claims of the estate, including potential avoidance actions related to the misuse and transfer of estate assets that involved overpaying for venture investments and acquisitions, improper loans, speculative trading, the purchase of luxury properties, as well as political and other donations.

The debtors have started issuing demand letters and pursuing avoidance claims through adversary proceedings, and there are many more litigation claims to come, FTX said.

“The volume and scope of the debtors’ preference, fraudulent transfer and other avoidance claims are vast,” the company said in the motion.

“The debtors believe that administration of their estates would be facilitated and value maximized by ensuring their ability to settle certain of these litigation claims and causes of action that are individually smaller in size, rather than needing to file a separate motion pursuant to Federal Rule of Bankruptcy Procedure 9019 and obtain court approval to resolve claims against every individual defendant in every adversary proceeding, irrespective of the value of the settlement.”

FTX said that without approval of the procedures, the debtors will incur significant costs and delays associated with preparing, filing and serving additional pleadings and motions with the court to bring value into the estates on account of small estate claims.

The debtors are specifically requesting the authority to settle small estate claims up to a maximum settled value of $10 million.

For any estate claim where the settled value is greater than that, the debtors will seek court approval of the proposed settlement through bankruptcy rule 9019, or as otherwise provided under the bankruptcy code.

FTX has headquarters in the Bahamas and filed Chapter 11 bankruptcy on Nov. 11, 2022 under case number 22-11068.

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