FTX, one of the largest crypto exchanges in the world, is facing backlash from its customers, who claim that the company is not paying them fairly for their cryptocurrency deposits. According to Reuters, the customers argue that FTX is using outdated prices to value their claims, which undervalue volatile cryptocurrencies that have soared in value since November 2022.
FTX Bankruptcy Plan Sparks Controversy
FTX filed for bankruptcy in November 2022 after facing regulatory pressure and mounting losses from its leveraged trading activities. The company said that it would pay its customers back in U.S. dollars based on cryptocurrency prices at the time of its bankruptcy petition.
However, many customers have objected to this plan, saying that it prevents them from benefiting from a rebound in crypto prices. They have filed dozens of letters to U.S. Bankruptcy Judge John Dorsey in Delaware, who is overseeing FTX’s Chapter 11 proceedings. They have asked him to stop the exchange from using 2022 prices to value their claims and instead use current market prices.
Some customers have also opposed the bankrupt exchange’s decision to value its equity shares and its own proprietary crypto token, FTT, at $0. They held over $700 million in FTT and FTX equity, which would be wiped out under the bankruptcy plan.
Three of the largest cryptocurrencies held by this bankrupt exchange customers — Bitcoin, Ether, and Solana — have substantially increased in price since November 2022. The price of Bitcoin has risen to about $46,000 from its November 2022 price of $17,871.63, and Solana has risen to about $97 from $20. Ether has nearly doubled in price over the same period.
For each cryptocurrency, FTX’s bankruptcy plan would pay customers a percentage of the November 2022 price. This means that some customers would receive much less than what they expected or deserved for their crypto deposits.
Customers Seek Alternative Solutions
Some customers have suggested alternative solutions for repaying their claims or recovering their losses. For example, one customer proposed that FTX should use an average price across all cryptocurrencies instead of a single date. Another customer suggested that FTX should offer more options for customers who want to sell or exchange their crypto assets before receiving payments.
Some customers have also expressed interest in joining other bankrupt crypto companies — such as Celsius Network, BlockFi, and Voyager Digital — that have used petition-date prices when valuing their claims. These companies have offered more favorable terms for their customers than FTX.
FTX said in a Dec. 27 court filing that fixing crypto prices based on the date of its bankruptcy petition is the only practical way to move forward and begin repaying customers. It also said that courts have allowed other bankrupt crypto companies to use petition-date prices when valuing their claims.
The bankrupt exchange will seek approval of its list of cryptocurrency prices at a Jan. 25 court hearing in Wilmington. The outcome of this hearing could determine whether or not FTX can satisfy its creditors and restore trust among its customers.
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