FTX Debtors have recently submitted an amended Chapter 11 reorganization plan, prompting concerns over potential massive losses for the defunct cryptocurrency exchange’s creditors. The plan outlines the valuation of creditors’ claims based on cryptocurrency prices from November 11, 2022, the date of FTX’s bankruptcy petition. However, this valuation fails to consider the wild fluctuations and substantial increase in cryptocurrency prices since then, leaving creditors at a significant disadvantage.
The period preceding the collapse of FTX witnessed a downward spiral in the cryptocurrency market, triggering a prolonged bear market that persisted into 2023. Consequently, cryptocurrency prices on November 11, 2022, were markedly lower than the current market prices. For example, Bitcoin (BTC) was valued slightly above $17,500 on November 11, 2022. However, according to recent data from CryptoSlate, the price of Bitcoin now exceeds $41,649.57 per coin. This difference equates to a loss of over $24,000 per BTC for FTX’s creditors.
A similar trend can be observed with Ethereum (ETH), with its value increasing from approximately $1,284 on November 11, 2022, to $2,214 at the time of writing. Consequently, FTX creditors stand to lose nearly $1,000 per ETH under the proposed reorganization plan. These substantial losses serve as a bitter blow to the creditors who were already impacted by the collapse of the exchange.
One prominent FTX creditor, Sunil Kavuri, expressed disappointment in a post on X, pointing out that the new reorganization plan blatantly disregards FTX’s own Terms of Service. These terms clearly state that digital assets belong to users and not to FTX Trading. By failing to acknowledge this, the proposed plan undermines the rights and principles outlined in the exchange’s Terms of Service. This is a critical oversight that adds insult to injury for FTX’s creditors.
It is important to note that certain classes of creditors retain the power to vote on the proposed reorganization plan before its finalization. This presents an opportunity for creditors to assert their rights and advocate for a fairer valuation of their claims, one that reflects the current market prices rather than the situation on November 11, 2022.
Creditors must come together and voice their concerns to ensure that their plight is acknowledged by the powers overseeing the reorganization process. By leveraging their collective influence, they can push for a more equitable distribution of assets and compensation.
As the revised Chapter 11 reorganization plan submitting by FTX Debtors faces scrutiny, it is crucial that the diverse group of creditors actively participates in the process. Through collective action, they can strive for a fairer outcome that aligns with the current cryptocurrency market conditions. It is only by challenging the proposed valuation and asserting their rights that these creditors can hope to mitigate their losses and secure a more favorable resolution.
The amended Chapter 11 reorganization plan put forward by FTX Debtors has raised concerns among the defunct exchange’s creditors. The plan’s valuation of claims based on cryptocurrency prices from November 11, 2022, exposes the creditors to significant potential losses, considering the substantial increase in cryptocurrency prices since then. Furthermore, the disregard for FTX’s own Terms of Service adds insult to injury for these creditors. Consequently, creditors must mobilize and actively participate in the voting process to advocate for a fairer outcome that aligns with the current market conditions. Only through collective action can they hope to recover from the blow dealt by FTX’s collapse.
