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FTX, the bankrupt cryptocurrency exchange, is set to seek
court approval to proceed with a proposed liquidation plan aimed at repaying
customers in cash. The plan faces opposition from some customers who argue they
are entitled to higher repayments.
Criticism over Valuation Methods
FTX, which filed for bankruptcy in November 2022, claims it
has recovered up to $16 billion to settle customer claims, including over $12
billion in cash. The company asserts its intention to fully repay all customer
claims, a stance it will present before U.S. Bankruptcy Judge John Dorsey in
Wilmington, Delaware, on Tuesday.
However, dissenting customers dispute FTX’s repayment
strategy, contending it relies on cryptocurrency valuations from November 2022,
despite a significant increase in prices since then. For instance, customers
who had one bitcoin deposited with FTX at the time of bankruptcy would now
receive about $16,800 in cash, considerably less than the current market value
of approximately $60,000 per bitcoin.
Judge Dorsey has previously approved FTX’s method of
evaluating claims based on November 2022 prices. Nevertheless, many customers
feel aggrieved by what they perceive as an unfair distribution, given the
subsequent rise in cryptocurrency values.
In response to the proposed plan, objecting creditors have
voiced strong opposition, arguing that FTX’s communication to customers about a
“full recovery” with interest is misleading. They have filed lawsuits
outside of bankruptcy court, challenging FTX’s ownership of customer deposits
and demanding repayment based on current cryptocurrency prices.
FTX seeks creditor votes on bankruptcy wind-down payments https://t.co/HBLjhNpyP9 pic.twitter.com/EpkfGNfkpG
— Reuters (@Reuters) June 25, 2024
FTX Collapse: Impact on Millions of Investors
FTX’s collapse earlier sent shockwaves through the
cryptocurrency sector, impacting an estimated 9 million customers and investors
worldwide with substantial financial losses. The exchange‘s former CEO and
founder, Sam Bankman-Fried, who is now serving a 25-year prison sentence, was
implicated in the mismanagement that led to FTX’s downfall.
John Ray, FTX’s current CEO, emphasized to Reuters that
returning deposited cryptocurrencies directly to customers was not feasible due
to misappropriation by the previous management. Ray, known for his expertise in
corporate turnarounds, has been leading FTX through the complex bankruptcy
proceedings.
This article was written by Tareq Sikder at www.financemagnates.com.
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