FTX, the bankrupt cryptocurrency exchange, is set to seek court approval to proceed with a proposed liquidation plan aimed at repaying customers in cash. The plan faces opposition from some customers who argue they are entitled to higher repayments.
FTX, which filed for bankruptcy in November 2022, claims it has recovered up to $16 billion to settle customer claims, including over $12 billion in cash. The company asserts its intention to fully repay all customer claims, a stance it will present before U.S. Bankruptcy Judge John Dorsey in Wilmington, Delaware, on Tuesday.
However, dissenting customers dispute FTX’s repayment strategy, contending it relies on cryptocurrency valuations from November 2022, despite a significant increase in prices since then. For instance, customers who had one bitcoin deposited with FTX at the time of bankruptcy would now receive about $16,800 in cash, considerably less than the current market value of approximately $60,000 per bitcoin.
Judge Dorsey has previously approved FTX’s method of evaluating claims based on November 2022 prices. Nevertheless, many customers feel aggrieved by what they perceive as an unfair distribution, given the subsequent rise in cryptocurrency values.
In response to the proposed plan, objecting creditors have voiced strong opposition, arguing that FTX’s communication to customers about a “full recovery” with interest is misleading. They have filed lawsuits outside of bankruptcy court, challenging FTX’s ownership of customer deposits and demanding repayment based on current cryptocurrency prices.
FTX seeks creditor votes on bankruptcy wind-down payments https://t.co/HBLjhNpyP9 pic.twitter.com/EpkfGNfkpG
— Reuters (@Reuters) June 25, 2024
FTX Collapse: Impact on Millions of Investors
FTX’s collapse earlier sent shockwaves through the cryptocurrency sector, impacting an estimated 9 million customers and investors worldwide with substantial financial losses. The exchange’s former CEO and founder, Sam Bankman-Fried, who is now serving a 25-year prison sentence, was implicated in the mismanagement that led to FTX’s downfall.
John Ray, FTX’s current CEO, emphasized to Reuters that returning deposited cryptocurrencies directly to customers was not feasible due to misappropriation by the previous management. Ray, known for his expertise in corporate turnarounds, has been leading FTX through the complex bankruptcy proceedings.