FTX Debtors recently submitted an amended Chapter 11 reorganization plan, putting the spotlight on the potential losses that the defunct cryptocurrency exchange’s creditors may face. The plan suggests valuing the claims of these creditors based on the cryptocurrency prices recorded on November 11, 2022, the day FTX filed for bankruptcy protection. Unfortunately, this particular date coincided with a downward spiral in the crypto market, which was further exacerbated by FTX’s bankruptcy filing. As a result, cryptocurrency prices on November 11, 2022, were significantly lower compared to the current market prices. Consequently, creditors are likely to experience substantial losses when comparing the value of their assets to the prevailing market prices.
Bitcoin, one of the most prominent cryptocurrencies, had a price of just over $17,500 on November 11, 2022, according to data from CryptoSlate. However, over the past year, Bitcoin’s value has more than doubled, reaching $41,649.57 at the time of writing. This significant increase signifies that FTX creditors will face a loss of more than $24,000 per Bitcoin.
Similarly, Ethereum, another leading cryptocurrency, saw its price rise from approximately $1,284 on November 11, 2022, to $2,214 today, based on CryptoSlate data. Consequently, creditors of the defunct exchange will suffer a loss of nearly $1,000 per ETH.
One of the FTX creditors, Sunil Kavuri, expressed dissatisfaction with the reorganization plan in a post on X. Kavuri highlighted that this plan somehow disregards FTX’s Terms of Service, which clearly state that digital assets belong to users and not FTX Trading. These terms and conditions are essential in protecting the rights and interests of the creditors who entrusted their assets with FTX.
Certain classes of FTX creditors will have the opportunity to vote on the reorganization plan before it is ultimately adopted. This voting process is crucial as it allows different creditors to voice their concerns and potentially influence the final outcome. It is essential for these creditors to carefully evaluate the proposed plan and understand its implications in order to make an informed decision that aligns with their interests.
The amended Chapter 11 reorganization plan presented by FTX Debtors carries significant implications for the creditors of the defunct crypto exchange. By valuing claims based on crypto prices from November 11, 2022, these creditors are likely to face substantial losses compared to the current market prices. This, combined with the concerns raised by FTX creditor Sunil Kavuri about the plan’s disregard for FTX’s Terms of Service, makes it crucial for creditors to scrutinize the plan and participate actively in the voting process. Only by carefully evaluating the proposed plan can creditors ensure that their interests are adequately represented and protected in the finalization of FTX Debtors’ reorganization plan.