FTX creditors will only get 10-25% of their cryptocurrency back, according to newly revised bankruptcy documents shared by FTX creditor Sunil Kavuri.
The FTX creditor-activist explained that the creditors would receive reimbursements according to the petition date when cryptocurrency prices were much lower than today. To put this into perspective, the price of Bitcoin (BTC) was approximately $16,000 at the time the legal petition was filed.
The decision to reimburse creditors and customers using petition date prices sparked outrage among FTX creditors, Kavuri told Cointelegraph:
"Crypto holders are not whole at petition date prices as confirmed by the debtors, DOJ, and Judge Kaplan. Many FTX customers continue to suffer from mental distress, panic attacks, divorces, and suicidal thoughts as their life savings have been stolen and property still has not been returned."
Other FTX creditors and individuals overwhelmingly echoed Kavuri's sentiment. "It’s disgusting they sneak this into the plan so late, after the vote," one user stated. Another FTX creditor asked "I can’t understand why the law can’t protect us investors," and characterized the FTX collapse as a scam. A fellow FTX creditor remarked: "Disgraceful, we have been scammed twice!"
Source: Sunil Kavuri.
Kavuri also argued that Sam Bankman-Fried violated the FTX terms of service and the broader definition of property rights by using client funds to pay outstanding debts:
"The terms of service are unambiguous that title of digital assets is owned by the FTX customer. Sam was convicted beyond reasonable doubt for breaking the terms of service and transferring customer funds to pay off Alameda loans and buy Robinhood shares."
On Sept. 6, 2024, the FTX estate reached a deal with Emergent Technologies — an entity founded by Bankman-Fried — to secure the $600 million in Robinhood shares to pay off creditors.
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Other challenges to the bankruptcy reorganization plan
Kavuri and his followers are far from the only objectors to the FTX estate's reorganization plan. In August 2024, a United States-based trustee overseeing the bankruptcy process challenged the FTX reorganization — claiming that the plan grants far too many legal protections for administrators and representatives of the FTX bankruptcy estate.
In the legal filing, trustee Andrew Vara pointed out that these types of protections were not standard in similar situations and represented an alarming anomaly:
“Such immunity would far exceed the protections that estate professionals, whose employment and compensation are subject to Court approval and oversight receive during the case.”
The United States Securities and Exchange Commission (SEC) likewise indicated that they may object to the FTX reorganization plan if the former crypto exchange chooses to reimburse clients with stablecoin payments.
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