Several FTX clients have requested a United States bankruptcy judge prevent the defunct crypto exchange from valuing their cryptocurrency deposits based on 2022 prices. They argue that FTX’s approach is hindering them from capitalizing on the recent rise in crypto prices.
In supporting the debtor’s motion to estimate claims based on digital assets, the Official Committee of Unsecured Creditors expressed the belief that estimating claim values collectively, as proposed in the motion, is the most efficient way to streamline the claim reconciliation process and expedite the Chapter 11 confirmation.
The motion by the Debtors states:
“If the court determines that cryptocurrency deposits are not property of the estate then such cryptocurrency (which has appreciated more than $5 billion since the petition date) must be returned to customers in kind and may not be used to pay, among other things, administrative claims.”
According to the bankruptcy plan, FTX plans to reimburse customers in U.S. dollars, determined by cryptocurrency prices at the time of FTX’s bankruptcy filing in November 2022. While FTX contends that U.S. bankruptcy law mandates valuing claims using that date, customers argue that this method undervalues cryptocurrencies, which have surged significantly since the 2022 market low.
Sunil Kavuri, an FTX creditor activist, posted on X (formerly Twitter) about his lawyers, Moskowitz and Boies, objecting to the debtor’s motion to estimate claims. Cointelegraph contacted Kavuri to clarify if the lawyers advocate for customers to be reimbursed in kind with cryptocurrency. Kavuri explained that the lawyers argue customers should receive “at least the value of crypto back” as property rights remain unresolved.
In addition to the Official Committee of Unsecured Creditors, FTX customers globally have submitted numerous comparable letters to the U.S. bankruptcy court before the Thursday deadline to challenge FTX’s valuation approach. FTX aims to have its list of cryptocurrency prices approved at a court hearing on Jan. 25 in Wilmington, Delaware.
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Some customers say the proposal is unjust to holders of Bitcoin (BTC) and other volatile assets, alleging preferential treatment for stablecoin holders and external investors who acquired FTX bankruptcy claims at a lower cost.
My lawyers Moskowitz and Boies that represent FTX creditors in MDL filed an objection to Debtors motion to estimate claims at petition
— Sunil (FTX Creditor Champion) (@sunil_trades) January 12, 2024
Fighting for FTX creditors to maximise recovery for FTX creditors
We may commence our adversary proceeding for property rights as unresolved pic.twitter.com/kBx8KWyScU
The values of three significant cryptocurrencies held by FTX customers — Bitcoin, Ether (ETH) and Solana (SOL) — have significantly risen since FTX declared bankruptcy. FTX customers have also opposed the company’s decision to value its equity shares and token, FTT, at $0. Over $700 million in FTT and FTX equity held by customers would be erased under the bankruptcy plan.
In a court filing on Dec. 27, 2023, FTX stated that determining crypto prices based on the bankruptcy petition date is the only practical approach to initiating customer repayments.
FTX mentioned that courts had permitted other bankrupt crypto firms like Celsius Network, BlockFi and Voyager Digital to utilize petition-date prices to assess their customer’s claims.
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