A group of creditors led by Sunil Kavuri have raised objections to the reorganization plan filed by FTX's bankruptcy managers. According to a court filing dated June 5, the creditors argue that the plan does not pass the best interest test. Sunil stated that the plan cannot be confirmed under law because it includes releases that are not in the estate's best interest and overlooks property rights issues.

Specifically, the creditors contend that FTX's proposal for cash repayment would trigger a taxable event, which could be avoided if repayment were made in-kind. This would require creditors to pay taxes on gains upon receiving cash, as stated:

"The Debtors suggest that this 'forced exchange' constitutes a taxable event, causing additional burdens on customers through mandatory taxation that could be mitigated by distributing assets in-kind."

Additionally, the creditors emphasized the need for FTX to update the disclosure statement for IRS settlement, including the examiner's report. This objection comes after a recent agreement to settle tax claims with the IRS.

Under the settlement plan, the IRS will receive a $200 million priority claim within 60 days of approval, along with another $685 million lower-priority claim to be paid after full customer reimbursements.

FTX's bankruptcy managers unveiled a reorganization plan on May 7, proposing full cash repayment for creditors. According to the plan, creditors with claims under $50,000 would receive a 118% recovery within 60 days of court approval, while other non-governmental creditors would be reimbursed their total claims plus up to 9% interest.