FTX Debtors recently submitted an amended Chapter 11 reorganization plan that paints a bleak picture for the defunct crypto exchange’s creditors. The proposed plan evaluates the value of creditors’ claims based on cryptocurrency prices from November 11, 2022, the day FTX filed for bankruptcy. Unfortunately, this date coincides with a severe dropdown in the crypto market, triggering a lasting bear market. As a result, creditors are now facing substantial potential losses compared to the current market value of their assets.
The revised reorganization plan intends to value creditors’ claims using crypto prices from November 11, 2022. However, this date saw major cryptocurrencies experiencing significantly lower prices than today’s values. To illustrate, on November 11, 2022, Bitcoin (BTC) was trading slightly above $17,500, as per data from CryptoSlate. In contrast, BTC’s price has more than doubled to reach $41,649.57 at the time of writing. Consequently, FTX creditors will suffer losses of over $24,000 per BTC.
Similarly, Ethereum (ETH) was valued at around $1,284 on November 11. However, it has since surged to $2,214 as of now, representing a substantial gain. For FTX’s creditors, this sharp increase translates to a loss of nearly $1,000 per ETH.
One disgruntled FTX creditor, Sunil Kavuri, expressed dissatisfaction with the new reorganization plan, emphasizing its disregard for FTX’s Terms of Service. According to Kavuri’s post on X, the Terms of Service explicitly states that digital assets belong to users and not FTX Trading. However, the current plan fails to account for this critical distinction.
Certain classes of FTX creditors are entitled to vote on the revised reorganization plan before its finalization. This opportunity presents an important chance for affected parties to voice their concerns and potentially influence the outcome.
FTX creditors are now grappling with the harsh reality of substantial losses as they navigate the revised Chapter 11 reorganization plan. The selected valuation date of November 11, 2022, aligns with a turbulent period in the crypto market, resulting in significantly lower cryptocurrency prices. This unfortunate timing means that FTX’s creditors will incur significant losses compared to the assets’ present market value. As the plan moves forward, it is crucial for creditors to exercise their voting rights and advocate for their best interests. Despite the daunting challenges ahead, it is essential for creditors to remain active participants in the resolution process to seek a fair outcome.
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