FTX Debtors Resolve Cryptocurrency Claims Upon Bankruptcy Settlement

The bankruptcy of FTX, one of the largest cryptocurrency exchanges in the world, has sparked a debate over how to value the claims of its customers who lost their funds in the collapse. The FTX debtors announce their amended Chapter 11 plan of reorganization, wherein they propose retroactively setting the value of customer asset claims to the time when the exchange filed for bankruptcy on November 11, 2022.

According to a recent court filing in the United States Bankruptcy Court for the District of Delaware, any claim against FTX based on customer entitlement aimed at compensating the holder will be based on the value as of the date of the exchange’s bankruptcy filing of November 11, 2022.

If approved, the plan will value the claim by converting it into cash, considering the conversion rates specified in a conversion table. The conversion rates will impact the market prices of various cryptocurrencies at different points on specific dates in November 2022.

The overall cryptocurrency market is expected to be influenced by these fluctuations. However, since that time, there has been a significant increase in crypto prices. At the moment of filing, bitcoin was $17,036, and at the moment of publishing, it stands at $42,272.

FTX Settles $873M Asset Sale, Repays Creditors

FTX received approval on November 30 to settle its debts by deliberately selling around $873 million. Morrison Cohen’s business solutions chair, Joseph Moldovan, addressed FTX’s equity complexities. The debtors involved faced imposed challenges. Moldovan commented, stating:

What makes the FTX bankruptcy most unusual is debtors being these complex entities with quite large amounts of debt. Typically months and months’ worth of preparatory work goes on.

Meanwhile, Critics have severely criticized the operations of this insolvent exchange and its related corporate bodies, Alameda Research and BitMEX. Among these, the coffers of these insolvency entities had shifted cryptocurrencies to various crypto exchanges, amounting to $23.59 million.

Furthermore, the settlement proposal acknowledges that the debtors of FTX may have repercussions for cryptocurrency investors. Investors may have lost their funds or asserted claims against the defunct exchange and its affiliates.

Related Reading | BlackRock Bitcoin ETF Gains Traction in SEC Talks