Several FTX clients have urged a U.S. bankruptcy judge to reconsider the defunct crypto exchange’s valuation of their cryptocurrency deposits, which is based on 2022 prices.
They argue that FTX’s approach is preventing them from benefiting from the recent surge in crypto prices.
The Official Committee of Unsecured Creditors, in support of the debtor’s motion to estimate claims based on digital assets, believes that collectively estimating claim values, as proposed in the motion, is the most efficient way to simplify the claim reconciliation process and expedite Chapter 11 confirmation.
The Debtors’ motion states that if the court determines that cryptocurrency deposits are not part of the estate, the appreciated cryptocurrency, which has grown by more than $5 billion since the petition date, must be returned to customers in kind and not used to pay administrative claims, among other things.
FTX’s bankruptcy plan outlines a reimbursement in U.S. dollars based on cryptocurrency prices at the time of the November 2022 bankruptcy filing.
FTX argues that U.S. bankruptcy law mandates valuing claims using that date, while customers contend that this method undervalues cryptocurrencies that have surged since the 2022 market low.
Sunil Kavuri, an FTX creditor activist, raised objections to the debtor’s motion to estimate claims.
When contacted by Cointelegraph, Kavuri clarified that his lawyers,
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Moskowitz and Boies, advocate for customers to receive “at least the value of crypto back” since property rights remain unresolved.
In addition to the Official Committee of Unsecured Creditors, FTX customers worldwide submitted letters to the U.S. bankruptcy court challenging FTX’s valuation approach before the Thursday deadline. FTX intends to have its list of cryptocurrency prices approved at a court hearing scheduled for January 25 in Wilmington, Delaware.
Some customers argue that the proposal unfairly favors stablecoin holders and external investors who acquired FTX bankruptcy claims at a lower cost, while holders of Bitcoin (BTC) and other volatile assets are left at a disadvantage.
The values of three major cryptocurrencies held by FTX customers—Bitcoin, Ether (ETH), and Solana (SOL)—have substantially increased since FTX declared bankruptcy.
Additionally, customers oppose the company’s decision to value its equity shares and token, FTT, at $0, which would erase over $700 million in FTT and FTX equity held by customers under the bankruptcy plan.
In a court filing on December 27, 2023, FTX argued that determining crypto prices based on the bankruptcy petition date is the only practical approach for initiating customer repayments.
FTX also pointed out that other bankrupt crypto firms like Celsius Network, BlockFi, and Voyager Digital had been permitted by courts to use petition-date prices to assess their customer claims.
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