The amended Chapter 11 reorganization plan filed by FTX Debtors on December 16 has raised concerns among the defunct crypto exchange’s creditors. The plan proposes valuing the creditors’ claims based on crypto prices from November 11, 2022, the day FTX filed for bankruptcy. However, during the days leading up to the FTX collapse, the crypto market experienced a substantial downturn, which triggered a bear market that persisted well into 2023. Consequently, the cryptocurrency prices from November 11, 2022 were significantly lower compared to current market prices.
Potential Losses for Creditors
The difference in crypto prices between November 11, 2022, and the present day will result in significant losses for FTX creditors. For instance, according to CryptoSlate data, Bitcoin (BTC) was priced just above $17,500 on November 11, 2022. However, over the past year, Bitcoin has more than doubled in value, with the current price at $41,649.57. This means that FTX creditors will suffer a loss of over $24,000 per BTC.
Similarly, Ethereum (ETH) has seen substantial growth, rising from around $1,284 on November 11, 2022, to $2,214 at the time of writing, according to CryptoSlate data. This represents a loss of nearly $1,000 per ETH for FTX’s creditors.
Sunil Kavuri, an FTX creditor, expressed dissatisfaction with the new reorganization plan, highlighting that it disregards FTX’s Terms of Service. The Terms of Service clearly state that “Digital Assets are the property of Users and not FTX Trading.” By valuing the creditors’ claims at outdated crypto prices, the plan undermines the rights of the creditors and fails to acknowledge the true value of their assets in the current market.
Certain classes of creditors will have the opportunity to vote on the revised reorganization plan before it is finalized. It is crucial for the creditors to thoroughly assess the plan and its implications. The voting process provides an opportunity for the creditors to voice their concerns and potentially push for changes that align with their best interests.
FTX Debtors must consider the long-term implications of valuing the claims at outdated crypto prices. It is important for the reorganization plan to uphold fairness and transparency, ensuring that creditors are not disproportionately burdened by losses resulting from the market conditions at the time of FTX’s bankruptcy filing. A thorough review and examination of the plan is necessary to protect the rights and interests of the creditors.
The revised Chapter 11 reorganization plan proposed by FTX Debtors has raised valid concerns regarding the valuation of creditors’ claims and potential losses. By utilizing outdated crypto prices, the plan fails to account for the significant growth in digital asset values in the past year. Creditors must carefully evaluate the plan and actively participate in the voting process to ensure fairness, transparency, and the protection of their interests.
