The bankruptcy of FTX, one of the largest cryptocurrency exchanges in the world, has sparked a debate over how to value the claims of its customers who lost their funds in the collapse. The debtors of FTX have filed an amended Chapter 11 plan of reorganization, which proposes that the value of customer asset claims will be retroactively set to the time when the exchange filed for bankruptcy on Nov. 11, 2022.
According to a recent court filing in the United States Bankruptcy Court for the District of Delaware, any customer entitlement claim against FTX aimed at compensating the holder will be based on the value as of the date the exchange filed for bankruptcy on Nov. 11, 2022.
If the plan is approved, the value of a claim will be determined by converting it into cash using conversion rates specified in a conversion table. The conversion rates will reflect the market prices of various cryptocurrencies at different points during November 2022.
However, there has been a significant increase in crypto prices since then. Bitcoin was valued at $17,036 during the filing, but at the time of publication, it stands at $42,272.
FTX’s $873 Million Asset Sale And Creditor Repayment
FTX received approval on November 30 to settle its debts by deliberately selling around $873 million. Joseph Moldovan, who serves as the chair of business solutions at Morrison Cohen, elaborated on the complexity and difficulty faced by FTX’s debtors in managing their obligations. Moldovan commented, stating:
What’s most unusual about the FTX bankruptcy is that the debtors are complex entities with significant amounts of debt. Normally, there are months and months of preparation.
On another note, there has been considerable scrutiny of this bankrupt exchange’s activities and those of its affiliates, Alameda Research and BitMEX. Notably, the wallets linked to these defunct entities transferred digital assets worth $23.59 million to multiple crypto exchanges. The settlement proposal by FTX’s debtors could have implications for crypto investors who have lost their funds or have pending claims against the bankrupt exchange or its affiliates.
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