Former customers of the bankrupt cryptocurrency exchange FTX are contesting the proposed bankruptcy plan, arguing it unfairly excludes them from significant crypto market gains observed last year. Over 80 individual clients have filed objections, demanding a reassessment of the repayment strategy outlined in the plan.
Once managed by Sam Bankman-Fried, FTX experienced a severe downturn amidst fraud allegations, leading to its collapse. The company initiated bankruptcy proceedings on November 11, 2022, leaving many customers stranded with crypto assets locked on the platform.
The proposed bankruptcy plan controversially fixes the value of customers’ digital assets to the date of FTX’s bankruptcy filing, offering to settle claims in U.S. dollars instead of returning the original cryptocurrencies. This approach has sparked discontent among customers who argue it ignores the significant price increases of Bitcoin and other digital currencies over the past year.
For instance, Bitcoin holders are expected to receive $16,871 per BTC based on the valuation at the filing date, despite Bitcoin’s surge above $48,000, leading customers to claim the valuation does not accurately reflect current market conditions.
The bankruptcy team, led by Restructuring Officer John J. Ray III, is actively working to recover both cash and crypto assets. Court approval has been obtained to sell the held crypto, aiming to create a substantial fund for distribution among customers. However, objections from over 80 clients highlight dissatisfaction with the valuation method in the plan, underscoring the complexities surrounding FTX’s bankruptcy proceedings. As the crypto world grapples with regulatory scrutiny and legal complexities, the resolution of FTX’s bankruptcy case will be closely watched for its implications on customer rights and the broader crypto industry.