FTX's New Plan Spells Financial Setbacks for Creditors

Valuing Assets on Past Crypto Prices

The amended Chapter 11 reorganization plan, filed by FTX Debtors on December 16, suggests a valuation method for creditor assets that may result in substantial financial losses. This approach hinges on using cryptocurrency prices from November 11, 2022, the date when FTX filed for bankruptcy.

Cryptocurrency Market's Downward Trend

The period preceding FTX's collapse witnessed a significant downturn in the cryptocurrency market. This decline was exacerbated by the exchange's bankruptcy declaration, culminating in a prolonged bear market stretching well into 2023.

Comparative Losses in Cryptocurrency Values

On the pivotal date of November 11, major cryptocurrency values were markedly lower compared to current prices. This disparity indicates notable potential losses for creditors. For example, Bitcoin (BTC) was valued just above $17,500 then, while its current price has soared above $41,649.57. This denotes a staggering loss exceeding $24,000 per BTC.

Ethereum's Price Increase

Ethereum (ETH) also displays a similar trend, having escalated from approximately $1,284 to $2,214. Creditors, thus, face a loss nearing $1,000 per ETH.

Disregard for Terms of Service

Sunil Kavuri, an affected FTX creditor, points out that the proposed reorganization plan overlooks the Terms of Service of FTX. These terms explicitly state that digital assets belong to the users rather than FTX Trading.

Creditor Voting on the Plan

Certain creditor groups will have the opportunity to cast their votes on this reorganization plan before its finalization.

Despite the procedural advancements, this reorganization plan overlooks the fundamental rights and financial well-being of numerous FTX creditors.