The former CEO of Alameda Research, Caroline Ellison, has agreed to forfeit the majority of her assets to FTX creditors as part of a settlement with the FTX bankruptcy estate. This agreement, outlined in a court filing, aims to recover assets to benefit creditors impacted by the collapse of FTX, a major cryptocurrency exchange. Ellison will transfer “substantially all of her assets” to the FTX debtors, including assets not already seized by the government or allocated for her legal defense. She has also pledged to cooperate fully with ongoing and future investigations related to the case.
FTX’s downfall began in late 2022 when the company filed for bankruptcy, leading to a legal battle to recover assets from former executives, including Ellison and FTX founder Sam Bankman-Fried. The current litigation seeks to reclaim approximately $22.5 million in bonuses Ellison received in February 2022, along with $6.3 million transferred to her in July and September 2021. After the asset transfer, Ellison will be left with only physical personal property. A hearing is scheduled for November 20 to finalize the settlement.
The FTX bankruptcy case has been complex and has drawn significant attention within the cryptocurrency industry. Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware recently approved FTX’s reorganization plan, which has received support from about 94% of creditors within the “dotcom customer entitlement claims” class, representing approximately $6.83 billion in claims. Ellison’s involvement in the collapse of FTX led to a two-year prison sentence, while Sam Bankman-Fried received a nearly 25-year prison sentence earlier this year. He was also ordered to repay up to $11 billion to investors and lenders.
Despite her sentencing, Ellison has been commended for her cooperation with the bankruptcy estate’s efforts. Her contributions have resulted in the recovery of hundreds of millions of dollars in debtor assets for the benefit of creditors. Last month, the SEC warned that it may challenge FTX’s repayment plan if it involves returning funds to creditors using stablecoins. While repaying creditors with stablecoins may not be illegal, the SEC reserves the right to contest such repayments if they involve US-dollar pegged crypto assets. FTX has considered various strategies to make creditors whole, including liquidating assets and settling claims based on their U.S. dollar value at the time of the bankruptcy.
In summary, Caroline Ellison’s agreement to forfeit her assets to FTX creditors is part of a settlement with the FTX bankruptcy estate to benefit impacted creditors. The complex FTX bankruptcy case has seen approval of a reorganization plan, with significant support from creditors. Ellison’s involvement in the collapse of FTX resulted in a prison sentence, while her cooperation with the bankruptcy estate has led to the recovery of millions of dollars in debtor assets. The SEC has raised concerns about FTX’s repayment plan involving stablecoins, signaling potential challenges ahead. FTX continues to explore options to repay creditors, including settling claims in cash or stablecoins.
