FTX will request a judge’s approval on Tuesday to allow its customers to vote on a liquidation plan to repay them in cash. The crypto exchange, which filed for bankruptcy in November 2022, claims it has recovered up to $16 billion, including over $12 billion in cash, to repay customers in full. U.S. Bankruptcy Judge John Dorsey will be asked to approve the disclosure statement and initiate voting on the wind-down plan at a court hearing in Wilmington, Delaware. However, some customers argue that their claims are being valued based on the much lower cryptocurrency prices at the time of FTX's bankruptcy, leaving them feeling short-changed despite the recent rise in crypto prices.
Disputes have arisen among customers who deposited cryptocurrencies like Bitcoin (GBTC) on FTX. They argue that the liquidation plan fails to account for the significant increase in crypto prices since the bankruptcy. For example, a customer with one Bitcoin deposited would receive about $16,800 in cash, far below the current value of around $60,000. These customers have filed lawsuits outside of bankruptcy court, seeking full repayment of their deposits at current values, and object to the proposed voting on the bankruptcy plan, calling it misleading. FTX’s CEO John Ray has stated that the funds to repay these claims in cryptocurrencies are no longer available, having been misappropriated by former CEO Sam Bankman-Fried.
Market Overview:- FTX seeks court approval to vote on cash repayment plan.
- Customers dispute claim valuations based on lower 2022 crypto prices.
- FTX has recovered up to $16 billion for repayments.
- Customers argue for repayments at current cryptocurrency values.
- Lawsuits filed to challenge FTX’s ownership of customer deposits.
- FTX claims it cannot repay in crypto due to missing funds.
- Bankruptcy court decision on disclosure statement pending.
- Voting on wind-down plan could commence soon.
- Full repayments expected within 60 days for most customers if approved.
FTX's collapse has left around 9 million customers and investors facing significant losses. CEO John Ray, who took over post-bankruptcy, emphasized that cash payments are the only fair method to distribute value among customers with various types of cryptocurrency assets. He noted that FTX held only a fraction of the Bitcoin and Ethereum that customers believed the exchange possessed at the time of the Chapter 11 filing. Ray stated that repaying customers in the currently appreciated value of their tokens would unfairly disadvantage those who held cash, stablecoins, or other crypto assets.
Ray further explained that 98% of FTX’s customers could receive full repayment within 60 days of the court’s approval of the wind-down plan. The faster payment option will cover all customers owed up to $50,000. The objecting creditors have expressed their dissatisfaction, claiming that the proposed plan misleads customers into believing they will receive a full recovery. They urge the court to reject the current voting forms and provide a clearer understanding of the repayment terms.
