Cryptocurrency exchange FTX, facing bankruptcy as of November 11, 2022, has announced a repayment plan that has drawn mixed reactions among its former customers. This plan, based on the value of the funds at the time of bankruptcy, which might seem reassuring at first glance, could end up being a significant financial loss for many users.
FTX unveils its reorganization plan
Cryptocurrency exchange FTX, declared bankrupt on November 11, 2022, announced in its reorganization plan the intention to reimburse the funds lost by their clients based on their value at the time of bankruptcy.
This announcement may seem reassuring to some ex-users of the platform, but to many represents a significant financial loss.
When FTX fell, the market was at a 2-year low. Since then, the cryptocurrency market has appreciated by almost 85%, the price of Bitcoin has increased by more than 140%.
Bitcoin price evolution since FTX bankruptcy
Sunil Kavuri, a creditor activist at FTX who lost about $2 million after the company’s bankruptcy, criticized the repayment plan in a post on the X Network.
He argues that the repayment plan offered by FTX violates the platform’s terms of servicewhich routinely guarantee ownership of their digital assets to customers, not the company.
FTX debtors filed for reorg. Plan
Most importantly, they ignored the FTX TOS which states that digital assets are the property of users and not FTX Trading
The plan says that digital assets are valued at conversion coefficients (prices) Petition Date pic.twitter.com/WTj07nlOP5
— Sunil (FTX Creditor Champion) (@sunil_trades) December 16, 2023
FTX’s reorganization plan is designed to give customers a fair refundwhile avoiding lengthy court proceedings such as that seen in the Mt. Gox, which has been around since 2014.
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However, this plan is subject to a vote for which only certain creditors have a vote, so it could be imposed on some creditors who will not have a say. Although the decision may disadvantage some parties affected by the bankruptcy, its goal is to guarantee efficient resolution of the fileaccording to the FTX filing.
The main creditor groups and clients involved in the bankruptcy proceedings have already approved the plan. It will be put to a vote by other creditors late next year before being submitted for final review by a US bankruptcy judge.John Dorsey, who will have to judge the plan “fair and just” to be generally applied.
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FTX is drowning in debt
This situation is all the more frustrating knowing this FTX pays out about $1.3 million a day in bankruptcy feeshe settled with various firms such as Sullivan and Cromwell or Alvarez and Marshall.
Total legal fees paid by FTX since its bankruptcy thus reaching approximately $1.45 billion, more than the $1.42 billion it owes its customers.
The latest figures from the FTX bankruptcy are interesting:
Customer shortfall: $1.422 billion
Bankruptcy fees: $1.45 billion pic.twitter.com/FhCtFPeQ3z— Jameson Lopp (@lopp) December 17, 2023
This debt disparity raises concerns about the utility of such spendingespecially considering that they could participate in the payment of part of the victims of the bankruptcy.
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We remind you that the United States Tax Service asked the company in April 2023 for taxes in the amount of 44 billion USD. Since the company had difficulty paying such an amount, the claim was revised twice and dropped to $24 billion.
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Source: United States Bankruptcy Court
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First attracted by the lure of profit, now I’m trapped deep down the rabbit hole. With no way out, I just have to share my knowledge and convey the passion I have for the blockchain world. I am also the creator of Adopt a Block, an educational site dedicated to Bitcoin.
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