Numerous FTX clients have urged a U.S. bankruptcy judge to block the collapsed crypto exchange from assessing their cryptocurrency holdings at 2022 values. They argue that FTX’s method prevents them from benefiting from the recent surge in cryptocurrency values.
The Official Committee of Unsecured Creditors, supporting the debtor’s proposal to estimate claims based on digital assets, believes that a collective valuation, as suggested, is the most efficient way to streamline the claims reconciliation process and hasten the Chapter 11 confirmation.
The Debtors’ motion states that if the court finds cryptocurrency deposits are not part of the estate, then such cryptocurrency (which has appreciated by over $5 billion since the filing date) must be returned to customers in its original form and cannot be used for paying administrative claims, among other expenses.
FTX’s bankruptcy plan involves reimbursing customers in U.S. dollars, based on cryptocurrency values at the time of FTX’s bankruptcy filing in November 2022. While FTX argues that U.S. bankruptcy law requires using this date for valuation, customers contend this method undervalues their cryptocurrencies, which have significantly increased in value since the 2022 market low.
Sunil Kavuri, an FTX creditor activist, shared on X (formerly Twitter) that his attorneys, Moskowitz and Boies, are challenging the debtor’s motion to estimate claims. Cointelegraph reached out to Kavuri for clarification on whether the lawyers are pushing for customers to be reimbursed in cryptocurrency. Kavuri indicated that the lawyers are arguing for customers to receive “at least the value of crypto back,” as property rights are still in question.
Besides the Official Committee of Unsecured Creditors, numerous FTX customers worldwide have sent similar letters to the U.S. bankruptcy court, contesting FTX’s valuation method before the Thursday deadline. FTX seeks court approval for its cryptocurrency price list at a hearing on Jan. 25 in Wilmington, Delaware.
Some customers criticize the proposal as unfair, particularly to holders of volatile assets like Bitcoin and others, alleging it favors stablecoin holders and external investors who bought FTX bankruptcy claims at discounted rates.
The values of three major cryptocurrencies held by FTX customers — Bitcoin, Ether, and Solana — have risen substantially since FTX’s bankruptcy declaration. Customers are also contesting FTX’s decision to value its equity shares and token, FTT, at $0, potentially nullifying over $700 million in FTT and FTX equity.
In a Dec. 27, 2023, court filing, FTX claimed that using bankruptcy petition-date prices is the only feasible method to begin customer repayments.
FTX noted that courts allowed other bankrupt crypto firms like Celsius Network, BlockFi, and Voyager Digital to use petition-date prices for evaluating their customers’ claims.
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