FTX Debtors recently filed an amended Chapter 11 reorganization plan, and unfortunately, this plan may result in significant losses for the defunct crypto exchange’s creditors. The proposal suggests evaluating the creditors’ claims based on cryptocurrency prices from November 11, 2022, the day FTX filed for bankruptcy. However, during the period leading up to FTX’s collapse, the crypto market experienced a downturn, which triggered a bear market lasting for several months into 2023. Consequently, the crypto prices on November 11, 2022, were significantly lower than the current market prices, indicating potential losses for the creditors.
The disparity in crypto prices between November 11, 2022, and the present time means that FTX creditors will face substantial potential losses compared to the value of their assets in today’s market. For instance, on November 11, 2022, Bitcoin (BTC) traded slightly above $17,500, according to CryptoSlate data. However, as of now, the price of Bitcoin has more than doubled, reaching $41,649.57, illustrating a potential loss of over $24,000 per BTC for the creditors.
Similarly, Ethereum’s (ETH) price also experienced growth from approximately $1,284 on November 11 to $2,214 at the time of writing, according to CryptoSlate data. Consequently, the creditors of the defunct exchange will face a loss of nearly $1,000 per ETH.
Sunil Kavuri, a creditor of FTX, raised a crucial point regarding the amended reorganization plan. Kavuri stated that the plan disregards FTX’s Terms of Service, where it is clearly mentioned that digital assets belong to the users and not FTX Trading. This omission raises concerns for the creditors who may potentially lose a substantial portion of their assets due to the evaluation being based on outdated crypto prices.
It is essential to note that only specific classes of FTX creditors will have the opportunity to vote on the proposed reorganization plan before its finalization. This voting process aims to include the opinions and interests of the affected parties in determining the outcome. However, the potential for significant losses remains a cause for concern.
FTX creditors are facing potential losses due to the amended Chapter 11 reorganization plan. The valuing of claims based on outdated crypto prices can result in substantial financial setbacks for the creditors, particularly as the crypto market has experienced significant growth since November 11, 2022. Moreover, the discrepancy with FTX’s Terms of Service further adds to the uncertainty surrounding the proposed plan. As the voting process takes place, it is vital for the creditors’ voices to be heard, considering the potential impact on their assets’ value.
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