Some FTX creditors argue for repayment in the cryptocurrencies they initially held, rather than receiving a fraction based on 2022 low prices.
While some FTX customers support the crypto valuation proposal, others express concerns about its fairness, especially for holders of volatile assets like Bitcoin.
Several FTX clients petitioned the U.S. bankruptcy court to prevent the exchange from using 2022 prices to value their cryptocurrency deposits.
FTX’s bankruptcy plan proposes reimbursing customers in U.S. dollars based on cryptocurrency prices on the day of the company’s November 2022 bankruptcy filing.
FTX claims U.S. bankruptcy law requires using the cryptocurrency prices on the date of the bankruptcy filing, but customers argue this undervalues their assets.
Sunil Kavuri, representing FTX creditors, states that his lawyers plan to object to the debtor’s motion to estimate claims.
Kavuri’s lawyers argue that FTX customers should receive “at least the value of crypto back,” even if the cryptocurrency itself cannot be returned.
The Official Committee of Unsecured Creditors supports FTX’s motion to estimate claims based on digital assets for efficiency in processing claims.
The motion by the Debtors states:
“If the court determines that cryptocurrency deposits are not property of the estate then such cryptocurrency (which has appreciated more than $5 billion since the petition date) must be returned to customers in kind and may not be used to pay, among other things, administrative claims.”
FTX customers worldwide have submitted letters to the U.S. bankruptcy court, objecting to the proposed valuation approach as unfair.
According to court documents, FTX requested court approval of its cryptocurrency prices list at a hearing on January 25, 2023, in Wilmington, Delaware.
Some customers allege FTX’s proposed valuation method unfairly benefits holders of stablecoins and external investors, to the detriment of Bitcoin and other volatile cryptocurrency holders.
FTX customers not only object to the cryptocurrency valuation but also to the company’s decision to value its equity shares and FTT tokens at $0.
However, FTX responds to customer objections, arguing that valuing cryptocurrency assets using current prices is impractical due to significant fluctuations.
FTX’s court filing cites precedents where courts allowed bankrupt crypto firms to use petition-date prices to value customer claims.
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