Caroline Ellison, the former CEO of Alameda Research, has reached an agreement to surrender the majority of her assets to FTX creditors as a part of a settlement with the FTX bankruptcy estate. The agreement, outlined in a court filing on Monday, is aimed at recuperating assets to benefit creditors affected 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. Additionally, Ellison has committed to fully cooperating with the FTX bankruptcy estate in ongoing and future investigations related to the case.
FTX filed for bankruptcy in late 2022, leading to a legal battle to recover assets from former executives, including Ellison and FTX founder Sam Bankman-Fried. The lawsuit 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. As per the settlement terms, Ellison will retain only physical personal property following the asset transfer. The settlement is set to benefit the creditors impacted by the collapse of FTX, and a hearing is scheduled for November 20th to finalize the agreement.
Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware recently approved FTX’s reorganization plan, which received support from about 94% of creditors within the “dotcom customer entitlement claims” category, representing approximately $6.83 billion in claims by value. Caroline Ellison’s involvement in the FTX collapse resulted in a two-year prison sentence, while Sam Bankman-Fried, FTX’s founder, received a nearly 25-year prison sentence earlier this year and was ordered to repay up to $11 billion to investors and lenders. Despite her sentencing, Ellison has been recognized for her cooperation with the bankruptcy estate’s efforts, resulting in the recovery of substantial assets for the benefit of creditors.
In addition to Ellison’s settlement, the SEC has raised concerns about FTX’s repayment plan, particularly if it involves returning funds to creditors using stablecoins. The SEC cautioned that while repaying creditors with stablecoins may not be inherently illegal, the agency reserves the right to challenge such repayments if they involve US-dollar pegged crypto assets. FTX has explored various strategies to make creditors whole, including a plan to relaunch the exchange, which has since been abandoned. The latest proposal from FTX includes liquidating assets and settling claims based on the U.S. dollar value of those assets at the time of the exchange’s bankruptcy, with creditors being repaid in cash or stablecoins under this plan.
Overall, Caroline Ellison’s decision to forfeit the majority of her assets to FTX creditors as part of a settlement marks a significant development in the aftermath of the FTX collapse. The approval of FTX’s reorganization plan and the ongoing legal proceedings highlight the complexities surrounding the case. With key players like Ellison and Sam Bankman-Fried facing legal repercussions, the cryptocurrency industry continues to grapple with the fallout from FTX’s bankruptcy. The SEC’s scrutiny of FTX’s repayment plan underscores the regulatory challenges facing cryptocurrency exchanges in ensuring compliance with existing laws and regulations. As the case unfolds, stakeholders will be closely monitoring the proceedings to assess the implications for the broader crypto ecosystem.
