FTX Debtors’ Plan for Reorganization
The FTX Debtors estate has submitted an amended Chapter 11 plan for its reorganization, causing confusion among investors and creditors regarding the next steps for the defunct exchange. The proposed plan, led by CEO John Ray III and the legal team from Sullivan & Cromwell, aims to value crypto claims based on their worth at the time of the company’s bankruptcy filing, rather than current market values.
FTX’s Collapse and the Crypto Industry
The collapse of FTX in November 2022 had a significant impact on the crypto industry, with repercussions still being felt a year later. The collapse contributed to a further decline in struggling crypto prices, leading some to question if it signaled the end of a thriving crypto industry.
At the time of FTX’s bankruptcy, Bitcoin was valued at around $17,000, significantly lower than its all-time high of $69,000. Since then, however, the cryptocurrency industry has made substantial progress towards recovery, with Bitcoin currently trading at $42,000.
Valuation of Crypto Claims
In the new filing made in the United States Bankruptcy Court for the District of Delaware, FTX’s debtor estate requested that customer entitlement claims against the exchange be valued based on their worth at the time of the exchange’s collapse. If approved, this would involve converting crypto assets into cash and distributing them to creditors.
FTX Debtors have filed the reorg. Plan
Most importantly they have ignored FTX TOS that states Digital Assets are the property of Users and not FTX Trading
The plan says that Digital Assets are valued at Petition Date conversion rates (prices) pic.twitter.com/WTj07nlOP5
— Sunil (FTX Creditor Champion) (@sunil_trades) December 16, 2023
The plan has sparked controversy among FTX creditors, who argue that their claims should be based on the current market values of the assets. According to Sunil Kavuri, an outspoken FTX creditor, this contradicts FTX’s Terms of Service, which state that digital assets belong to customers, not the exchange.
FTX’s plan values crypto claims at petition prices
The reorganization plan goes against FTX’s Terms of Service, which stated that the titles to digital assets belonged with customers and not the exchange
Debtors say “The Plan aims to create the best economical outcome for all… pic.twitter.com/cgj77gcHrG
— Sunil (FTX Creditor Champion) (@sunil_trades) December 17, 2023
Uncertainty Regarding Repayment to Users
When FTX filed for bankruptcy, it owed its customers and creditors over $8.7 billion. The bankrupt exchange has received permission from a US judge to liquidate its cryptocurrency holdings worth more than $3.4 billion. In addition, an order in November allowed the sale of assets in crypto trusts valued at $873 million.
FTX’s estate has made various efforts to recover funds to repay its creditors and users, but there is still no definitive timeline for full repayment. Many users are uncertain if they will receive their crypto assets in full. Recently, FTX transferred 1,593 ETH, worth $3.66 million, to a private wallet linked to Coinbase. Meanwhile, former CEO Sam Bankman-Fried remains in jail pending his sentencing scheduled for March 2024.
Hot Take: FTX Debtors’ Controversial Reorganization Plan Raises Concerns
The amended Chapter 11 plan submitted by FTX Debtors has caused confusion and controversy among investors and creditors. By valuing crypto claims based on their worth at the time of the exchange’s collapse, rather than current market values, FTX Debtors are facing criticism from creditors who argue that this goes against FTX’s own Terms of Service.
The uncertainty surrounding FTX’s ability to repay users in full adds to the concerns of those affected by the exchange’s collapse. With significant amounts owed and ongoing efforts to recover funds, users are left wondering if they will ever receive their crypto assets as promised.
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