FTX Creditors File Lawsuit Over Payout Plans
A group of creditors of the bankrupt crypto exchange FTX has filed a lawsuit in response to the proposed payout plans. They argue that deposits should be considered their property rather than FTX’s. The exchange’s plan would see creditors repaid based on November 2022 prices of digital assets, which are significantly lower than their current values. For example, Bitcoin, currently valued at $43,250, was worth only $16,800 in November 2022.
Creditors Call for Fair Valuation of Digital Assets
The creditors are demanding a centralized approach to value the millions of unliquidated claims based on digital assets. They argue that a fair and compliant valuation is necessary for plan solicitation, voting, setting reserves, and making distributions. While most claims against FTX are based on fiat and stablecoins, there are also other assets that are not easily converted to US dollars.
To address this, FTX proposes dollarizing the values of claims based on non-fiat and non-stablecoin digital assets. They rely on a Digital Assets Conversion Table to estimate the values of these claims.
FTX’s Defense of Digital Asset Valuation Methodology
FTX defends its methodology for valuing digital assets and believes that valuation based on the petition time pricing is required under the Bankruptcy Code. The exchange argues that this approach is fair and equitable for all creditors. Certain objections regarding specific digital assets will be considered in a future evidentiary hearing.
FTX maintains that determining digital asset repayment prices based on the filing date for bankruptcy in November 2022 is required by bankruptcy law. However, creditors have raised concerns about significant price changes since the petition date.
Implications for FTX’s Creditors and the Crypto Community
The court’s decision on the valuation of digital assets and the resolution of the lawsuit will have significant implications for FTX’s creditors and the broader crypto community. The outcome will determine how creditors are repaid and may set a precedent for future bankruptcies involving digital assets.
Hot Take: Legal Battle Over FTX’s Payout Plans Raises Questions About Digital Asset Valuation
The lawsuit filed by FTX creditors highlights the challenges of valuing digital assets in bankruptcy cases. With the proposed payout plans based on November 2022 prices, many creditors argue that they are being unfairly compensated due to the significant increase in asset values since then. On the other hand, FTX defends its methodology, stating that it complies with bankruptcy law and treats all creditors fairly. The court’s decision in this case will provide clarity on how digital assets should be valued in bankruptcy proceedings, potentially impacting future cases and shaping the relationship between crypto exchanges and their customers.
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